Judge orders U.S. SEC to expedite resource extraction rule

A federal judge has ordered the U.S. Securities and Exchange Commission to fast-track a final rule requiring oil, gas and mining companies to disclose payments to foreign governments, after a human rights group complained the regulator was dragging its feet.

In a Sept. 2 ruling, Judge Denise J. Casper for the U.S. District Court for the District of Massachusetts handed Oxfam America a major victory, and told the SEC it will get 30 days to file an "expedited schedule" with the court for how it plans to finalize the rule.

"The SEC is now more than four years past the deadline set by Congress for the promulgation of the final rule," Casper wrote in her decision.

"The court concludes...that the SEC's delay in promulgating the final extractive payments disclosure rule can be considered unlawfully withheld."

Oxfam has been among one of the most vocal supporters of the resource extraction rule, saying it will play a crucial role in helping combat corruption in resource-rich countries.

Required by the 2010 Dodd-Frank Wall Street reform law, the rule calls for oil, gas and mining companies to disclose how much they pay governments in taxes, royalties and other types of fees for exploration, extraction and other activities.

The SEC did complete work on the rule in August 2012, a few months after Oxfam first sued the SEC over delays. But the non-stop litigation surrounding the rule did not end after the SEC adopted it.

Trade groups including the Chamber of Commerce and the American Petroleum Institute filed a lawsuit accusing the SEC of conducting a flawed analysis of the rule's costs to the industry. In 2013, a federal judge tossed the rule out, saying it was "arbitrary and capricious."

Alcoa plans new R&D center for advanced 3D printing processes

Metals company Alcoa Inc said on Thursday it will invest $60 million to expand its research and development center in Pennsylvania to explore ways to make 3D printing viable on an industrial scale to produce parts for the aerospace, automotive and construction sectors.

The move is part of New York-based Alcoa's strategy of investing in more advanced aerospace and automotive products while selling off some of its more traditional yet costly smelting facilities.

Also known as additive printing, 3D printers build three-dimensional metal parts by layering and heating metal alloy powder, which are then treated in a forge to make them stronger.

The 3D process has been used to build prototypes for 25 years, but only now is making its way into regular production.

Alcoa's chief technology officer, Ray Kilmer, said the current available alloys are expensive, and part of the focus of the expanded R&D center will be to explore new aluminum, titanium, nickel and other metal alloys.

"The (alloy) powders need to be improved upon, they need to be cost effective, and they need to work better in the additive printing process," Kilmer said. "What's new now is the machines are getting better, faster and cheaper. Alcoa is stepping into the process so we can get the performance and the cost to where they need to be."

Kilmer said additive printing could be used to manufacture anything from fasteners to wheels and jet engine turbine blades. The R&D center would also look at different additive printing technologies and ways to reduce the waste of costly metal alloys that occurs in traditional manufacturing processes.

Construction on the new facility is due to be completed in the first quarter of 2016.

Proponents of 3D printing say it can help aircraft manufacturers cut the cost of parts made from titanium, which costs seven times more than aluminum.

Norwegian titanium component manufacturer Norsk Titanium AS recently announced plans to establish the world's first industrial-scale 3D printing facility in the United States.

U.S. conglomerate General Electric Co has said it will introduce its first 3D-printed parts in an aircraft engine platform in 2016, saying that the lighter and simpler parts will improve engine performance.

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Iran’s top leader says no nuclear deal unless sanctions are lifted

Iran’s supreme leader says world powers must lift international sanctions and not merely suspend them as part of a landmark nuclear agreement.

Speaking to a group of clerics, Ayatollah Ali Khamenei said “there will be no deal” if the sanctions are not lifted. His remarks were read by a state TV anchorman.

Khamenei says some US officials have spoken of the “suspension” of the sanctions, which he says is unacceptable. He says Iran will only partially comply with its commitments if the sanctions are merely suspended.

US President Barack Obama recently secured enough support to prevent the Republican-led Congress from blocking the deal.

The agreement would curb Iran’s nuclear activities in return for sanctions relief.

Why is Germany suddenly protecting Gazprom?

GERMANS HAVE A PLAN OF PROTECTING GAZPROM’S BUSINESS IN EUROPE

German Minister of Finance, Wolfgang Schauble, proposed amendments to the European Comission’s prerogatives. Albeit between the lines it can be understood that it is all about preventing an investigation against Gazprom.

German Ministry of Finance informed on 30 July that the Minister Wolfgang Schäuble would like to deprive the European Commission of part of its powers in two fields, namely antitrust proceedings and, currently particularly important for Germans, enforcing compliance with the budgetary discipline by the member states

According to Schauble the European Commission is more politicized and its powers to fight against monopolies could be taken over by a new office, similar to the Federal Cartel Office

If it had a German boss, we could expect other decisions favourable to Russia. The Federal Gas Network Agency did not have a problem with Gazprom’s monopoly on the part of German pipelines, namely OPAL and NEL, which distribute gas from the Nord Stream Pipeline, thanks to which some traditional transit countries, in the first instance Ukraine, but also Poland, can be bypassed. The European Commission agreed that only a part of this system could be exempted from the anti-monopoly rules, and in face of Russian aggression in Ukraine did not allow for further concessions. However, they are demanded from a German regulator. It is all the more important in the context of a new Gazprom’s plan.

In face of the problems with construction of the Turkish Stream gas pipeline to Turkey as well as no chances of a fast turn of gas export to China, Russians have to expand the Nord Stream Pipeline if the still don’t want to transit through Ukraine, which is hostile towards them. It is the purpose which Nord Stream 2 project is to serve. It has already tempted European companies: Shell, E.on and OMV. They may be followed by the governments in Amsterdam, Germany and Vienna, which are traditionally optimistically predisposed to cooperation with Russians. It would match the Berlin’s plan, assuming that Germany would become a new gas hub, allowing Russians to bypass other transit countries and Germans to earn from transit through their territory. Infrastructure is being gradually prepared for enactment of this scenario. Russians buy out shares in consecutives pipe lines and gas storage facilities in Angela Merkel’s state.

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Chinese buyers spike Toronto and Vancouver's luxury home market

The luxury home market in Vancouver doesn’t seem to be affected by the recently announced Canada-wide recession, and RE/MAX largely attributes the hot market to foreign buyers.

Demand for homes priced at $3 million or more has spiked 79 per cent between January and July of this year in Vancouver and 61 per cent in Toronto, both because of foreign investment – in particular from China.

And according to RE/MAX, these investors are actually living in their homes.

“While there has been a lot of concern about foreign investors in Canada’s housing market, we’re seeing that the foreign buyers in our major luxury markets are living in their properties,” said Gurinder Sandhu, Executive Vice President, RE/MAX INTEGRA Ontario-Atlantic Canada Region in a statement.

“These buyers see Canada as a great place to live, invest and raise their families.”

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Madagascar plans to increase royalty fees and claim 10 percent stakes in mining concessions, under proposed changes to its mining code, according to a draft document seen by Reuters on Wednesday.

One of Africa's poorest countries, Madagascar hopes to accelerate economic growth by developing natural resources but it has struggled to attract foreign investors in recent years due to political instability and falling commodity prices.

The draft, dated Aug. 27 and which could still be tweaked before parliament debates it in October, suggests the Indian Ocean island could take up to 10 percent stakes in concessions for free, and could acquire further shares at market rates.

The much-anticipated changes regarding concessions would apply to projects yet to be granted exploitation licences and are unlikely to affect the country's biggest projects, including the $7 billion Ambatovy nickel mine, operated and 40 percent-owned by Canada's Sherritt International, or the $1 billion ilmenite mine run by London-listed Rio Tinto.

But most smaller mining firms seeking to renew permits or obtain fresh licences could be affected. Only a handful of licences have been granted since 2011, with a backlog of about 4,000 permit requests gathering dust at the mining ministry.

The draft bill also suggests lifting royalty fees to 4 percent for minerals and 5 percent for precious metals, while the fee for rough stones would be 7.5 percent.

Rates are now 2 percent of gross exports of raw commodities and 1 percent if minerals are processed locally before export.

The proposed changes are likely to rattle foreign investors and contradict comments by Mining Minister Joeli Lalaharisaina in July when he told Reuters there would be no substantive changes to the existing code.

"The mood among mining executives is between curious and despondent," said one Madagascar-based mining expert who has seen the draft bill, adding it would be "almost impossible" to attract foreign investors with terms outlined in the draft.

Lalaharisaina in July said the new bill was expected to be passed in early October, after consultation with mining companies.

The draft also suggests the government will create a national mining company and require mining firms to hand over research data to the government.

Madagascar hosts a global mining conference in the capital Antananarivo on Sept. 23-25, when the draft is likely to be a key topic for discussion.

Just When You Thought It Couldn't Get Worse For Brazil...

Just when you’re sure - and we mean sure - that it can’t possibly get any worse, or at least not materially worse in the very short-term, something else happens to further underscore the deep, dark economic malaise plaguing one of the world’s most important emerging markets.

So after last Friday’s GDP print which confirmed that the country slid into recession during Q2 - a quarter in which Brazilians suffered through the worst inflation-growth outcome in at least a decade - and after July’s budget data which confirmed that the country’s fiscal situation is, as Citi put it, “a bloody terror film,” we got a look at industrial production today and boy, oh boy was it bad. So bad in fact, that it missed even the lowest analyst expectations. Goldman:

IP contracted by a much larger than expected -1.5% mom sa (-8.9% yoy) in July (vs. the -0.1% mom sa market consensus). Furthermore, the June print was revised down to -0.9% mom sa from the original -0.3% mom sa. During the last nine months industrial production declined at an average monthly rate of -0.9% mom sa. Of the 24 main industrial segments, 14 recorded a contraction of output in July.

IP declined 8.9% yoy in July, with the largest decline recorded in capital goods -27.8%. Overall, IP declined 6.6% yoy during January-July 2015.

IP has now contracted for eight consecutive quarters and is likely to decline again during 3Q2015.

In July, IP was 14.1% below the peak level registered in June 2013 and was at the same level as March-April 2006.

The industrial sector (which has been reducing headcount) contracted 1.1% in 2014 and we expect it to contract at a much higher rate in 2015 as it continues to face strong headwinds from high levels of inventories, record low confidence indicators, a high and rising tax burden, rising energy costs, and weak external demand (particularly from Argentina for durable goods).

Meanwhile, exports cratered 24% and critically, it wasn't all because of lower commodity prices.

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Panama canal repairs to take one month - Officials

IHS Maritime 360 reported that Panama Canal officials have set aside up to one month to repair leaks discovered in August during the start of testing of the third set of locks.

Speaking at the Western Dredging Association's first annual meeting of its Mexico chapter in Mexico City on 1 September, Mr Javier Carrillo, international trade specialist for the Panama Canal Authority, said that the needed repairs will not delay the planned April 2016 opening of the new locks.

Mr Carrillo said that "I saw the cracks and got scared too. But we're actually glad it happened now, because we're in the testing phase - we're testing each and every component. Delaying the time table for the opening will be avoided because potential lock repairs were built into the schedule.”

He said that Panama Canal engineers, Grupo Unidos por el Canal, the construction firm that built the locks, and two independent consulting firms are in the midst of planning repairs.

Mr Carrillo added that the weather phenomenon known as El Nino, which triggered a drought in the Canal watershed that's causing water levels to fall substantially below their average, is a bigger concern than the leaking lock chamber.

He said that “Recent rainfall postponed a draught restriction that had been scheduled to go into effect on 8 September. However, if the effects of El Nino continue, we're going have to announce new draft restrictions through the canal. The rain is something we have no control over. The locks we can fix."

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El Nino:Warm episode

Quantitative tightening?

The great global monetary tightening of 2015 is under way, but it’s not being led by theFederal Reserve.

Even as U.S. policy makers ponder whether to raise interest rates this month, one recent source of central bank liquidity in financial markets is drying up and the loss of it partly explains August’s trading volatility.

Behind the drawdown are the foreign exchange reserves run by the central banks. Bolstered following financial crises in the late 1990s as a buffer against capital outflows and falling currencies, such hoards fell to $11.43 trillion in the first quarter from a peak of $11.98 trillion in the middle of last year, according to the International Monetary Fund.

A major warning from the most reliable bellwether of the world economy

South Korean exports in August plunged 14.7% from a year ago. This was much worse than the 5.9% decline expected by economists. And it was the biggest drop since August 2009.

This is a troubling sign, as Korea's exports represent the world's imports. Because it is the first monthly set of hard economic numbers from a major economy, economists across Wall Street dub South Korean exports as the global economic "canary in the coal mine."

Korea is a major producer of goods ranging from automobiles and petrochemicals to electronics such as PCs and mobile devices.

China, the world's second-largest economy, is Korea's biggest customer. And while many experts are skeptical of the reliability of China's official trade data, few doubt the quality of Korea's data.

"In the last decade, China was a major growth driver for Korea," Morgan Stanley's Sharon Lam said on Tuesday. "Korean exporters are proud of their success in China, as witnessed by Korea overtaking Japan to become China's number one import source since 2013. Korea's success in the Chinese market was characterized by its brand name, technology, and marketing efforts. Unfortunately, China is no longer a positive factor for Korea and in fact it has become a negative drag."

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China amends pollution law, no specific coal use targets

Amendments to China's 15-year-old air pollution have been approved by law legislators, which granted the state new powers to punish offenders and create a legal framework to cap coal consumption, state media reported recently.

China is now trying to equip its environmental inspection offices with greater powers and more resources to tackle persistent polluters and the local governments that protect them.

The amendments are expected to make local governments directly responsible for meeting environmental targets. They also ban firms from temporarily switching off polluting equipment during inspections and outlaw other behavior designed to distort emission readings.

However, lawmakers had rejected proposals to include specific coal consumption targets in the law and also ruled out a clause allowing local authorities to set their own restrictions on car use, the official Xinhua News Agency said earlier this week.

Wang Yi, head of the policy committee of the China Academy of Sciences, has told Chinese media the law fails to set clear goals on emissions and air quality standards.

According to the Ministry of Environmental Protection, concentrations of hazardous breathable particles known as PM2.5 fell 17.1% in the first half of 2015 to 58 mcg per cubic meter. China doesn't expect to meet the state standard of 35 mcg until 2030.

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China targets $300 bln power grid spend over 2015-20

China will spend at least 2 trillion yuan ($315 billion) to improve its power grid infrastructure over the 2015-2020 period, a report by a government newspaper said on Monday.

Despite falling power consumption growth, China is working to upgrade its cross-country power transmission capacity in order to reduce coal consumption along the smog-hit eastern coast and provide markets for energy producers in the resource-rich far west, where electricity demand is considerably weaker.

It has already built long-distance ultra-high voltage power lines connecting giant thermal power and hydroelectric stations in the west to eastern coastal regions like Shanghai.

The 2015-2020 investment is likely to provide a boost for sectors like copper. Demand from the power sector accounted for nearly half of China's estimated 8.7 million tonnes of refined copper consumption last year.

The plan was aimed at increasing the reliability of power transmission, which would favour copper-based cables over cheaper alternative aluminium-based cables, said Yang Changhua, senior analyst at state-backed research firm Antaike.

He did not give an estimate for copper consumption under the proposal, but said more than 1 million tonnes of copper had been used in power transmission projects in 2014 when the investment was about 170 billion yuan.

In a report published on the website of the National Energy Administration (NEA), China Electric Power News said the country was aiming to increase the total length of its high-voltage transmission lines to 1.01 million kms (627,585 miles) by the end of 2020, more than double the 2014 level.

Citing a new government action plan, it said China would work to make prices more flexible in order to reflect changes in costs and fluctuations in demand.

China's completed investment in grid construction fell 0.8 percent from a year ago to 163.6 billion yuan in the first half of this year.

Yang said the investment in grid construction could rise in the second half from the first half as the State Grid Corporation stepped up spending to meet its annual target.

China's wholesale and retail tariffs are currently set by the state. Some regions are introducing "differential prices" for industrial consumers that fail to meet environmental targets, while power producers that have installed clean generation technology also receive a subsidy from the government.

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Oil and Gas

Rosneft sells 15% stake in Vankor to India's ONGC

Rosneft has agreed to sell 15 per cent of Vankor, one of its largest oilfields, to India's ONGC.

The Russian state-controlled oil group has been courting Asian investors as it struggles under the burden of hefty debts and falling oil prices, writes the FT's Jack Farchy.

Discussions with ONGC, India's state oil company, over Vankor began last year.

Vankor is one of the jewels in Rosneft's crown, producing 22m tonnes of oil last year to make it the company's third-largest production subsidiary. The Russian state-controlled oil company is also working to expand it by developing a cluster of nearby fields that could more than double overall production.

The price of the deal was not disclosed. Bloomberg last month reported that ONGC was seeking to pay $900m for a stake in Vankor, though it did not say what size of stake was under discussion.

Rosneft has also been discussing the sale of a stake in Vankor to China's CNPC since last year. However, a deal has not yet been concluded as falling oil prices and western sanctions against the Russian group complicate negotiations.

Commenting on the deal, which was signed on the sidelines of the Eastern Economic Forum in Vladivostok, Igor Sechin, Rosneft chief executive, said:

Collaboration in such a large-scale project will allow establishinga brand new level of strategic cooperation between Rosneft and ONGC Videsh. This will accelerate the development of our partnership, in other large-scale oil and gas upstream projects in the region.

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Canacol Negotiates New Gas Sales as It Triples Colombia Output

Canacol Energy Ltd., a natural gas explorer in Colombia, is negotiating new supply deals as it steps up drilling and expects to more than triple gas production in the Andean country by year-end.

The producer is on track to increase gas output to about 90 million cubic feet a day in December to meet existing contracts, up from about 25 million now, Chief Executive Officer Charle Gamba said in an interview. The company is in talks to supply a further 25 million daily cubic feet.

“We are currently working on a number of smaller contracts that we hope to bring on stream early next year,” Gamba said in a telephone interview from Bogota Wednesday. “We are hoping that we can produce right to our productive capacity, which will be 120 million cubic feet.”

Canacol has risen 14 percent in Bogota this year, making it the top performer on Colombia’s Colcap index and one of only two to post a gain. The Andean nation’s two largest oil producers -- state-run Ecopetrol SA and Pacific Exploration and Production Corp. -- are among the worst performers.

Canacol plans to add two more wells at its Clarinete discovery by December, further increasing productive capacity by approximately 35 million cubic feet a day, Gamba said.

Colombian demand for gas is starting to outstrip supply, especially on the Caribbean coast, amid economic growth and fast declining production at aging fields operated by Chevron Corp. in partnership with Ecopetrol.

“It translates into a very strong pricing environment for local gas producers,” Gamba said. “That puts us in a very unique position. Because those fields dominated the supply of gas to the coast for 25 years, nobody has really been exploring around there.”

Gas prices in Colombia are $4 to $8 per million British thermal units at the wellhead, more than double prices in North America, Gamba said.

Canacol has partnered with drilling services company Perfolat de Mexico to participate in Mexican bidding rounds. Officials there have eased several key components of its energy auction to encourage greater interest, in response to the tepid participation for the country’s first private auction earlier this summer.

Shell and BG mega-merger faces regulatory delay

The £47billion mega-merger between oil giants Shell and BG Group faces regulatory delay after authorities in Australia deferred a decision to let the deal go ahead.

Shell said it was “working closely” with the Australian competition regulator after the watchdog delayed a critical decision on clearance for the deal, signalling it has reservations about the potential impact on gas supply.

The deferral of the decision until September 17 leaves the clearance from the Australian Competition and Consumer Commission as one of three key approvals still outstanding, alongside China and the UK.

The Australian and Chinese approvals are seen as raising the most vexing competition issues.

The proposed mega-merger, which got the green light from the European Commission on Wednesday, has raised worries among industrial energy users along the east coast of Australia that the availability and choice of gas supplies will be further restricted.

Prices for local consumers are already increasing sharply, partly because so much gas is set to be shipped from Queensland to Asia as LNG.

UK-based BG owns the massive Queensland Curtis LNG project, which started exports early this year, while Shell owns 50% of the Arrow Energy venture, the holder of the largest chunk of known, undeveloped gas reserves on the east coast.

In a letter to interested parties in June, the ACCC focused on the potential impact of the takeover on the wholesale supply of gas in eastern Australia.

It asked how closely Arrow and BG competed with each other and others on gas supply and whether buyers believed a combined Shell-BG would change incentives to supply gas to domestic rather than export customers.

A Shell spokesman said the group was informed late on Wednesday by the delay in the decision from September 3 to September 17.

Canadian Oil Sands project to operate at ‘minimal’ rates until end of the month

Canadian Oil Sands, the main owner of the giant Syncrude oil sands project in Alberta, said the venture won’t return to normal operations until at least the end of the month.

The project, the largest synthetic crude oil processing facility in Canada, was affected by a fire over the weekend. The incident, still under investigation, forced the company to halt productionat the 326,000 barrel-per-day mining and upgrading project.

Canadian Oil Sands said the project will operate with “minimal synthetic crude oil shipments and operating rates” for the next two weeks as part of a phased recovery.

“Affected units are planned to be subsequently restored to operation, with a return to more normal production rates anticipated towards the end of September,” it said.

The disruption means that Syncrude output this year will be “near the low end” of the current 96 million to 107 million barrel range for the year, the company said

COS confirmed the fire had destroyed “pipes, power and communication lines on a pipe rack between a hydrotreating unit and its associated amine unit.” However, it also said the incident did not cause damage to mining and extraction operations or other major upgrading units.

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Aramco Cuts All October Crude Pricing to U.S., Northwest Europe

Saudi Arabia, the world’s largest crude exporter, cut pricing for all October oil sales to the U.S. and Northwest Europe and reduced the premium on its main Light grade to Asia by 30 cents a barrel.

State-owned Saudi Arabian Oil Co. cut its official selling price for October sales to Asia of Arab Light crude to 10 cents a barrel more than the regional benchmark, the company said in an e-mailed statement. The discount for Medium grade crude for buyers in Asia widened 50 cents to $1.30 a barrel less than the benchmark.

Brent, a global oil benchmark, fell almost 50 percent last year as Saudi Arabia and other OPEC members chose to protect market share over cutting output to boost prices. Brent fell from over $100 a barrel in July 2014 to less than half that six months later. It traded at about $50 on Thursday.

The Organization of Petroleum Exporting Countries led by Saudi Arabia decided on June 5 to keep its production target unchanged to force higher-cost producers such as U.S. shale companies to cut back. The producer group has exceeded its target of 30 million barrels a day since May 2014.

Saudi Arabia reduced production in August to 10.5 million barrels a day, the first decline this year, according to data compiled by Bloomberg.

Middle Eastern producers are competing increasingly with cargoes from Latin America, North Africa and Russia for buyers in Asia. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.

China's CNOOC offers two Oct-Nov cargoes in first LNG supply tender

China National Offshore Oil Corp, the country's largest LNG buyer, has issued its first LNG supply tender, offering two cargoes for loading over October and November from the BG-operated Queensland Curtis LNG export plant in Gladstone, Australia, market sources said Thursday.

The sell tender -- widely regarded to be the first issued by a buyer in northeast Asia -- highlighted a radical shift to the supply and demand balance in the LNG industry, which has seen the Platts JKM fall from an historic high of $20.20/MMBtu in February 2014 to $7.50/MMBtu Thursday.

"CNOOC is snowed under with cargoes due to tepid downstream demand," one northeast Asian buyer said.

"Buyers are already struggling to absorb all the additional contract volumes that are coming to the market," another buyer said.

CNOOC offered the first cargo on an FOB basis for loading October 19-23, and the second cargo on a DES basis for loading November 18-19.

Interest in the tender would likely be limited, sources said, given weak demand in the Asia-Pacific region and the lean specification of the cargoes.

CNOOC was also planning to offer an additional two cargoes for loading in 2016 and an unspecified number of cargoes for loading from 2017 onward, all from QCLNG, they said.

The state-owned buyer has a 50% equity interest in QCLNG Train 1 and a contract with BG Group for the procurement of 5 million mt/year of LNG from the seller's portfolio.

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WoodMac: LNG projects pushed ahead despite oversupply

Wood Mackenzie said that despite the outlook for global LNG demand looking increasingly subdued, the number of LNG projects proposed to take a final investment decision in 2015 and 2016 has not reduced significantly, in contrast to the 45 upstream oil & gas projects which have postponed FID so far in 2015.

Wood Mackenzie says in its new global gas analysis that if there are no postponements the market could see an additional 100 million tonnes per annum of LNG sanctioned in the next 6-18 months, extending the likelihood of an oversupply of LNG in Asia to 2025.

Noel Tomnay, Vice President Global Gas & LNG Research for Wood Mackenzie says: “With the LNG market facing a wall of new supply just as China’s gas demand growth has faltered, it is surprising how few new projects chasing a final investment decision have been postponed.”

Tomnay said that global LNG supply is presently around 250 million tonnes per annum and there is a further 140 mmtpa under construction. “Recognising that the global market will struggle to absorb such a large supply uptick, for some time now we’ve been forecasting a soft global market. However that bearish prognosis is now being exacerbated by a demand downturn,” he added.

Wood Mackenzie points to Asia and China, in particular, as being key to its revised outlook. Tomnay elaborates: “China’s LNG import commitments are set to rise by 17% year-on-year between 2015 and 2020, from 20 to 41 mmtpa but China will struggle to take all this LNG so quickly. In contrast, China’s LNG imports fell by almost 4% yoy in the first half of 2015, as a consequence of subdued industrial output and fuel competition, which was driven by relatively low-priced oil.”

The outlook for longer term incremental LNG demand growth in China is also being negatively affected. And with lower industrial output and power generation competition increasingly characterising other key Asian LNG markets, like South Korea, Asian buyers are not in a hurry to finalise new LNG contracts, adds Tomnay. Wood Mackenzie’s view remains that the market opportunity for new LNG into Asia does not open up significantly until after 2022, with the key implication being that new project FIDs are not required until 2017 at the earliest.

The question remains whether companies are reassessing investment decisions on LNG projects in light of reduced demand. Tomnay points to an example from February this year: “Recognising this oversupply BG deferred its proposed US LNG export project at Lake Charles. But BG’s postponement has been an exception.”

Wood Mackenzie says that thus far most companies are continuing to push ahead with their new LNG projects. “Major project operators including Shell, Petronas, Eni, Anadarko, BP, ExxonMobil and Woodside maintain that their projects will take FID before the end of 2016,” Tomnay qualifies.

WoodMac poses a question why haven’t more companies followed BG’s suit if the market is unlikely to be able to absorb new LNG in the medium to long term? Tomnay explains some of the drivers behind the decision to press ahead: “Postponement could invalidate contracts for the portion of project LNG sold so far, and jeopardise hard-won stakeholder support, including from local communities. Some developers may be worried that a loss of momentum could favour their competitors and that a project postponement may be tantamount to a cancellation.”

Wood Mackenzie warns that if company statements are to be believed we will see FID on some 50 mmtpa of LNG from the US and a further 50 mmtpa from outside the US within the next 6-18 months. “Development of even half of this proposed supply could prolong the Asian oversupply to 2025. Wood Mackenzie’s view is that the global LNG market does not need all this LNG at the pace proposed and, as companies confront this reality, a raft of project postponements will follow,”Tomnay offers in closing.

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Shell keen to lease Indian west coast strategic oil storage

Royal Dutch Shell is in talks to lease India's new strategic oil caverns at Mangalore on the country's southwest coast, two sources said, giving it increased storage in a market where oil demand is increasing.

A decision on the Mangalore site, which has total capacity of around 11 million barrels of oil, depends on Shell winning relief from local sales tax, the sources said, while commissioning has been pushed back by two months to December.

India, the world's No.4 crude consumer and one of the few major economies which is still seeing strong demand growth, is building up strategic petroleum reserves (SPR) facilities at three locations in the country's south that will hold a total 36.87 million barrels of oil, enough to cover almost two weeks of its needs.

Under the proposal, Shell would use the Mangalore site for commercial storage, but in the event of an emergency would have to make supplies available to state-run refiners and keep the site filled at specified levels.

Shell would likely store oil grades used by a nearby 300,000 barrels per day (bpd) refinery owned by the state's Mangalore Refineries and Petrochemical Ltd (MRPL), the sources with direct knowledge of the matter said.

"It will be like a commercial storage for Shell, but in case of emergency the supplies will have to be made available to MRPL or any other (state-run) refiner," said one of the sources.

No decision had been made as to the origin of the oil to fill the facility, but it would most likely come from Africa where producers are looking for new buyers in the wake of the U.S. shale oil boom.

MRPL currentlly buys an average 2 million barrel of sweet African grades every month from spot markets.

The government expected to resolve the local tax issue, if a leasing deal was reached, the sources said.

Shell and Indian Strategic Petroleum Reserves Ltd (ISPRL), which is building the cavern, declined to comment.

ISPRL chief executive Rajan K. Pillai said the start-up of Mangalore's SPR, as well as sites at Padur further to the south, would be pushed back to December because of a delay in pipeline connections between the port and the storage sites.

Mangalore needed about 3 kms (1.9 miles) of pipelines, Pillai said. Padur, which has four divisions of about 4.6 million barrels each, lacked some 34 kms (21 miles) of pipeline.

India, the world's No.4 oil consumer, relies heavily on fuel imports, producing less than a third of its overall demand.

Santos auction faces challenge in volatile oil market

As rollercoaster oil prices roil markets, Australian oil and gas producer Santos Ltd faces a tough task to raise the $2 billion it needs from asset sales to slash its debt and avoid having to swamp the market with new shares.

Santos put its assets up for sale just over a week ago, desperate to rescue its stock from a 15-year low due to sliding oil prices and worries it will sell new shares to cut A$8.8 billion ($6.2 billion) in net debt.

The company, which has stakes in oil and gas production in Australia, Papua New Guinea, Indonesia and Vietnam, said it had already been approached with offers and would consider any other proposals over coming months.

Santos faces having to give up the jewel in the crown - its 13.5 percent stake in Papua New Guinea LNG, sell off a string of assets, or resort to a share sale to raise the A$3 billion that investors believe it needs.

"It's going to be a tough call for that board room," said a banker in Singapore pitching for work with potential bidders.

Bankers and analysts say a full takeover offer for Santos, which has a market value around A$4.5 billion, is unlikely as bidders would be deterred by its 30 percent stake in the nearly completed Gladstone liquefied natural gas (GLNG) project.

Excelerate halts US LNG export project

Excelerate Energy has ended its LNG export project in south Texas because of falling oil prices and other economic factors.

Texas-based Excelerate today asked the US Federal Energy Regulatory Commission (FERC) to withdraw its application to build a floating LNG export project in Lavaca Bay, Texas, making it the first company to halt its FERC proceedings for US LNG exports.

It is unclear if Excelerate is the first company to stop development of a US LNG export project because of low oil prices, as a number of other proposed projects have not entered the expensive FERC construction approval process and have not announced any progress since oil prices started to plummet last summer. Dozens of projects have applied to export up to 48 Bcf/d ofn natural gas from the contiguous US, far more than the market will support.

"Following an internal evaluation of the economic value of the project, Excelerate has determined that it will no longer pursue the project proceedings in the captioned dockets," Excelerate said in a letter to FERC today.

Excelerate in December asked FERC to suspend its review of the project, saying, "Recent global economic conditions — including, among other things, a steep decrease in the price of oil — have created uncertainty regarding the economics of the project."

Excelerate, which pioneered the development of onboard LNG regasification vessels, did not return an Argus inquiry seeking additional comment.

The company told Argus in June 2014 that it had spent about $50mn in the FERC approval process and expected to spend more.

The economics of US export projects are based on a large differential between domestic gas prices and global oil prices, as most long-term LNG contracts to Asia are linked to oil prices at an indexation rate of about 15pc. That means at oil prices of $100/barrel, the delivered price to Asia oil-linked contracts would be about $15/mmBtu, but at oil prices of $50/barrel the oil linked price falls to about $7.50/bl.

OPEC oil output in Aug falls from record on Iraq disruption - survey

OPEC oil output fell in August from the highest monthly level in recent history, a Reuters survey found on Wednesday, as disruptions to flows on Iraq's northern pipeline halted supply growth from the group's second-largest producer.

Largely stable output from Saudi Arabia and other Gulf members of the Organization of the Petroleum Exporting Countries indicated they are not wavering in their focus on defending market share instead of prices.

OPEC supply fell in August to 31.71 million barrels per day (bpd) from a revised 31.88 million bpd in July, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.

Oil LCOc1 has weakened due to surging output and is trading below $50, not far from a more than six-year low close to $42 reached last month. OPEC's shift to the market-share strategy in 2014, led by Saudi Arabia, deepened the decline.

Despite calls from some members for an emergency meeting, even OPEC delegates who favour supply cuts do not expect any to be agreed, leaving a surplus which OPEC's own numbers indicate is at least 2 million bpd on the market.

"I really see no chance for holding a meeting before the scheduled Dec. 4 meeting, which will reach no concrete agreement to drastically cut production," said a delegate from one of OPEC's African members.

"We know that the present oversupply is more than 2 million barrels per day."

The decline in OPEC output from July's level was the first since February based on Reuters surveys. Even so, OPEC has boosted production by almost 1.5 million bpd since the November 2014 switch in policy to defend market share.

July's output from OPEC's current 12 members was revised lower but is still the highest since Reuters records began in 1997. OPEC output was above 32 million bpd in 2008 until Indonesia left the group at the end of the year.

The biggest drop in August came from Iraq, one of the main drivers of the rise in OPEC output this year.

Exports from southern Iraq edged about 40,000 bpd lower to just above 3 million bpd, according to Iraqi officials and shipping data seen by Reuters.

Shipments from Iraq's north via Ceyhan in Turkey by Iraq's State Oil Marketing Organisation and the Kurdistan Regional Government posted a larger fall because of halts in the flow along the pipeline from Iraq, shipping data showed.

Top exporter Saudi Arabia kept output largely stable in August, sources in the survey said, following a decline in July. There was no significant change in the other major Gulf producers, Kuwait and the United Arab Emirates.

Nigerian exports rose in August according to loading schedules, although Royal Dutch Shell said on Aug. 27 it shut two pipelines and declared force majeure on Bonny crude exports, which could have a larger impact in September.

Algeria posted a small increase after starting production at two fields and output in Iran, eager to reclaim its traditional spot as OPEC's second-largest producer if and when sanctions are lifted, also edged up slightly.

Libyan production declined in August. Supply remains disrupted by unrest and negotiations to reopen closed oil facilities have yet to succeed.

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China oil product exports could see big jump as quotas surge

China's state-owned refiners could export up to 16.9 million mt (869,000 b/d) of refined products over August-December -- 44% more than the volume exported in the first seven months of the year, an analysis of latest information from industry sources and official data showed.

The Ministry of Commerce last week issued the fourth batch of export quotas for 2015 totaling 9.9 million mt of oil products -- triple the volume approved in the third batch and taking the total volume allocated so far for 2015 to 28.65 million mt, up 47% year on year, an industry source said.

The products covered under the export quota includes gasoil, gasoline, jet/kerosene and naphtha.

Chinese state-owned refiners need quotas or licenses from the government before they can export refined products.

In the first three batches, the ministry allocated 18.75 million mt, which when compared to the 11.75 million mt exported in the first seven months of the year -- based on data from the General Administration of Customs -- implies that the three state-owned refiners have 7 million mt of unused quotas still left.

Taking into account the unused and new quotas, Platts calculations show that the state-owned refiners can export up to 16.9 million mt of oil products for the rest of the year, 44% more than the volumes exported in the first seven months of the year.

Chinese refiners have been boosting oil product exports this year due to slowing domestic demand.

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Russia's Surgut to launch Shpilman oil field on Thursday

Russia's Surgut will launch its Shpilman oil field in Siberia on Thursday, the Russian government said on its website, in the latest sign the weak rouble is helping the country offset the impact of low global oil prices.

Russia, one of the world's largest crude producers, has been pumping oil at a post-Soviet record of around 10.7 million barrels per day this year, thanks to new oil fields coming on stream and the use of modern technologies at existing fields.

Low oil prices have not yet hit Russian oil production hard because the weak rouble offsets losses and makes Russian energy firms among the most profitable globally.

In a statement, the government said that Prime Minister Dmitry Medvedev plans to hold a video conference later on Thursday during which Shpilman oil field will be officially launched.

In June, Russian news agencies quoted Surgut's CEO Vladimir Bogdanov as saying that Shpilman was expected to produce about 50,000 tonnes of oil in 2015.

Shpilman is expected to produce 2.5 million-3 million tonnes of oil per year at its full capacity, compared with Surgut's total extraction of 61 million to 62 million tonnes.

Obama secures votes needed to approve Iran nuclear deal

The US president has secured the votes he needed for the passage of a historic nuclear accord with the Islamic Republic of Iran.

Barbara Mikulski, a Democratic Senator for the state of Maryland, will give her backing to the agreement brokered by US Secretary of State John Kerry and the other representatives of the so-called P5+1 nations, the Wall Street Journal reports.

Mikulski´s support means there are now 34 Democrats in the upper house of the US Congress, the Senate, who back the executive branch´s offer to lift sanctions on Iran in exchange for putting in place measures which are meant to curb the country´s nuclear ambitions.

That will allow Obama to veto any attempt by Congress to block an agreement.

Nonetheless, Obama will have to approve the deal despite the bipartisan majority which opposes it.

"No deal is perfect, especially one negitiated with the Iranian regime, [but it is] the best option available to block Iran from having a nuclear bomb," Mikulski reportedly said.

"The choice we face is ultimately between diplomacy or some form of War," the US president said in a 5 August speech.

FERC Approves Important Utica-to-Gulf Coast Pipeline Reversal

Last October MDN told you about an exciting project from Boardwalk Pipeline Partners’ Texas Gas Transmission pipeline that will reverse the flow from the Louisiana Gulf Coast all the way to Ohio.

The $110 million project, called the Ohio-Louisiana Access Project, would turn Texas Gas Transmission’s pipeline bidirectional and will not involve any new pipeline construction. It will provide an important new way for Utica and Marcellus drillers to get their gas to markets in the Midwest, South, and even to other countries via exports of LNG.

As is typical, anti-fossil fuelers flooded the Federal Energy Regulatory Commission (FERC) with negative comments about the project because it will encouraging more fracking. Undeterred, FERC approved the project last week, responding to antis (as they have before) by telling them FERC’s charter does not allow it to consider the source of gas or “climate change” or any of the other cockamamie things antis are worry about. FERC decides on projects based on how a project will affect the people and environment where the project gets built…

A court in the Netherlands ruled on Wednesday that a natural gas company, a joint venture by Royal Dutch Shell and Exxon Mobil, must compensate homeowners for declines in the value of their properties because of earthquakes linked to production at the Groningen field.

The ruling by the court in Assen could result in billions of euros of claims against the venture, known as NAM. Hundreds of thousands of homes and buildings lie in the affected area, which covers wide parts of the northern Netherlands.

The Netherlands has twice this year reduced production from the Groningen field, Europe’s largest, after the Dutch Safety Board, a government-financed but independent organization, said gas companies and regulators had failed to take the danger from gas production-linked earthquakes seriously enough.

“NAM is responsible for declines in the value of real estate that lies in the area where earthquakes are caused by gas production, and that damage is eligible for compensation,” said the judge, Ger Vermeulen, reading a summary of the ruling.

The judge added that homeowners must claim their losses on a case-by-case basis, and that the average decline in home values attributable to their location in the earthquake zone alone appeared to be no more than “several” percentage points, with some suffering a bigger drop and others none at all.

NAM has so far set aside 1.2 billion euros, or about $1.35 billion, to compensate for damage to buildings. But estimates of the cost of compensating homeowners for lost value and strengthening buildings in the affected region are far higher.

“We are going to study the considerations carefully and consider potential further steps,” Martijn Verwoerd, a NAM spokesman, said in a statement.

“We recognize the concern of inhabitants,” he said, adding that the company agreed that in some cases, earthquakes may reduce the value of homes.

The company has acknowledged responsibility for the damage caused by the quakes, but has maintained that it should compensate homeowners only if they sell their houses at a loss.

The court ruling specified that homeowners need not show that their property had suffered any physical damage, only that its value had been affected by its location in the quake area. It also found that homeowners could request compensation immediately, rather than waiting for a sale.

The case against NAM was brought by a group of 900 homeowners and 12 housing cooperatives.

US crude oil production down

Summary of Weekly Petroleum Data for the Week Ending August 28, 2015

U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending August 28, 2015, 269,000 barrels per day less than the previous week’s average. Refineries operated at 92.8% of their operable capacity last week. Gasoline production increased last week, averaging 9.8 million barrels per day. Distillate fuel production increased last week, averaging over 4.9 million barrels per day.

U.S. crude oil imports averaged about 7.9 million barrels per day last week, up by 656,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.7 million barrels per day, 0.2% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 835,000 barrels per day. Distillate fuel imports averaged 77,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.7 million barrels from the previous week. At 455.4 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 0.3 million barrels last week, and are in the middle of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.1 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 0.6 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 5.7 million barrels last week.

Total products supplied over the last four-week period averaged 20.3 million barrels per day, up by 2.9% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.5 million barrels per day, up by 4.8% from the same period last year. Distillate fuel product supplied averaged 3.7 million barrels per day over the last four weeks, down by 5.3% from the same period last year. Jet fuel product supplied is up 2.3% compared to the same four-week period last year.

Schlumberger acquires synthetic diamond specialist Novatek

Schlumberger announced Wednesday that it has acquired Novatek Inc. and Novatek IP, LLC, U.S.-based companies that specialize in synthetic diamond technology primarily for the oil and gas industry.

The existing relationship between Schlumberger and Novatek has delivered leading technologies, such as the Schlumberger StingBlade conical diamond element bit, and has been an incubator of novel ideas that are being incorporated into Schlumberger’s newestdrilling technology offerings. Building on this collaboration, the acquisition provides a new platform for Schlumberger to pursue its vision of continuously improving drillingperformance for customers.

“Novatek’s synthetic diamond manufacturing technology is already a key component of our drillbit offering,” said Khaled Al Mogharbel, president, Schlumberger Drilling Group. “With the addition of Novatek, we will enhance our research, engineering and manufacturing capabilities and continue to work with our customers to accelerate field adoption of these innovative drilling technologies.”

Novatek boasts a 60-year history of product development with a portfolio of more than 600 patents. Core development of synthetic diamond technology and other technologies will continue at the company’s lab in Provo, Utah, where most of the employees are based.

The Utica: Another Monster.

Columbus Business First reports that Chesapeake Energy Corp. is leading the way in Ohio in terms of natural gas production.

In Ohio’s Utica Shale, Chesapeake produced 83.2 billion cubic feet of the state’s total 222 billion cubic feet of natural gas during the second quarter. The company’s biggest well is located in Carroll County and produced 824.3 million cubic feet of natural gas during the second quarter.

During the second quarter, Chesapeake operated 491 of 978 total producing Utica wells in Ohio. However, Chesapeake is poised to sell some of its holdings, so its not clear how much longer the company will have the largest output of all of the Utica’s production companies.

Ohio’s Utica Shale wells continue to break all previous production for the last 100 years.

The state’s 978 horizontal wells produced 5.5 million barrels of oil and 221 billion cubic feet of natural gas in the second quarter of this year, the Ohio Department of Natural Resources reported Thursday.

Ohio’s oil volume grew by 20 percent from the first quarter, when wells statewide produced 4.4 million barrels.

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Cheniere cleared to export more LNG from Corpus Christi

Cheniere cleared to export more LNG from Corpus Christi

The United States Department of Energy issued an order authorizing Cheniere to export LNG from its stage 3 project (Trains 4 and 5) of the Corpus Christi liquefaction facility, to be located in San Patricio and Nueces Counties, Texas.

Cheniere has been authorized to export equivalent to approximately 514 Bcf/yr of natural gas for a 20-year term, according to the order.

Cheniere’s Corpus Christi liquefaction project is currently under construction and presently consists of Trains 1-3, three LNG storage tanks, two marine berths, and associated facilities.

Under the Stage 3 expansion project, Cheniere intends to add two 5 mtpa liquefaction trains, as well as a fourth LNG tank, to expand the Corpus Christi project.

Cheniere anticipates that construction of the Stage 3 project will commence by 2017, with exports commencing as early as 2021.

Fuel Ships Take 4,000-Mile Africa Detour as Oil Prices Plunge

At least five tankers will deliver refined products to European ports in August and September, sailing around South Africa rather than using the normal shortcut through Egypt’s Suez Canal, ship tracking data show. The falling cost of fuel oil, used to power ships, has made longer voyages viable at a time when there are advantages for traders to keep cargoes at sea. Long-distance shipments between continents have increased this year, according to Torm A/S, world’s second-biggest publicly traded product-tanker owner.

Plunging oil opens up new trades as product tankers take the long route to Europe

Brent crude futures plunged about 50 percent since August last year as OPEC nations kept pumping more than the market needs. Across oil markets, the rout triggered what traders call contango, a price pattern that lessens the need for speedy oil deliveries because future fuel prices are higher than immediate ones.

“There’s massive demand to move oil products over very long distances,” Erik Nikolai Stavseth, a shipping analyst at Arctic Securities ASA in Oslo, said by phone Aug. 27. “These shipments tell me that there are very good times ahead for product-tanker owners,” he said, referring to ships that carry refined fuels like gasoline and diesel.

Rates for hauling these fuels are surging. The sort of long-range tankers being used to sail around Africa will earn $28,375 a day this year, according to a survey of shipping specialists compiled by Bloomberg. That’s the most since at least 2010 and 19 percent more than anticipated at the end of last year.

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China signs off on $5 bln loan to boost Venezuela oil output -Maduro

Venezuela and China have signed a deal for a $5 billion loan designed to increase the OPEC country's oil production, Venezuelan President Nicolas Maduro said.

Maduro, speaking from China in a show broadcast on Venezuelan state television on Tuesday night, said the loan was destined "to increase oil production in a gradual way in coming months," without providing further details.

A source at Venezuelan state-run oil company PDVSA told Reuters in March that China was set to extend a "special" $5 billion loan that would likely stipulate hiring Chinese companies to boost output in the company's mature oil fields.

Venezuela has borrowed $50 billion from China through an oil-for-loans agreement created by late socialist leader Hugo Chavez in 2007, which has helped Chinese companies expand into Venezuelan markets amid chronic shortages of consumer goods there.

That financing has been especially crucial for Caracas since last year's oil market rout, which aggravated the country's severe economic crisis.

Eulogio del Pino, the oil minister and president of PDVSA , and Finance Minister Rodolfo Marco Torres were among key Venezuelan figures present at the president's "In Contact with Maduro" show, which broadcast this week from Beijing.

Speaking in front of a huge portrait of Chavez, Maduro also said that Venezuela currently sends around 700,000 barrels-per-day of oil to the Asian giant.

During the show, which usually lasts for hours and often includes live music and folkloric dance, Maduro lauded traditional Chinese medicine and art.

Nexen expects Long Lake oil sands shutdown to take two weeks

Nexen Energy, the Canadian subsidiary of Chinese state-owned CNOOC Ltd, is shutting down its Long Lake oil sands operations in northern Alberta in response to an emergency regulatory order, a company spokeswoman said on Tuesday.

Nexen estimated the shutdown process would take up to two weeks as it suspends pipeline operations and attempts to demonstrate to the Alberta Energy regulator that its pipelines are safe.

The provincial regulator ordered Nexen to shut in 95 pipelines at the Long Lake facility last Friday as part of an investigation into one of the largest-ever oil-related pipeline spills on North American soil, discovered in July.

The incident dealt another blow to Canada's oil sands industry in northern Alberta, which is under fire from environmental groups for its carbon-intensive production process.

Long Lake was producing about 50,000 bpd of bitumen before the spill, which is upgraded on site into refinery-ready synthetic crude. The upgrader also processes raw bitumen from other oil sands projects.

Nexen declined to comment on Tuesday about the impact on production, adding that it does not typically disclose production information on an individual asset basis. Nexen spokeswoman Diane Kossman said the suspension order was not expected to have any material impact on CNOOC's operations or financial conditions.

Synthetic crude prices rallied hard on Monday after news of the Long Lake shutdown. A separate production outage at the Syncrude oil sands project sent traders scrambling to secure supply, and extended those gains on Tuesday.

The order came three days after Nexen gave the regulator an internal company audit that revealed it was breaking some pipeline safety rules related to maintenance.

"We're managing the risks associated with safely shutting down this complex and integrated facility," Kossman said in a statement.

Last week's order suspended 15 pipeline licences for 95 pipelines that carry a range of products including crude oil, natural gas, salt water, fresh water and emulsion, the regulator said. It is also requiring Nexen to demonstrate that its pipelines can be operated safely.

Nexen apologized for the spill in July, explaining that it would likely take months to find the root cause of the leak, which released more than 31,500 barrels of emulsion, a mixture of bitumen, water and sand.

The regulator said it would not lift the suspension order until the company demonstrates that it can operate its pipelines safely.

China oil market reform paves way for new crude benchmark

China may launch a global crude oil futures contract as early as October to compete with the existing London Brent and the U.S. WTI benchmarks, three sources said, as it pushes ahead with reforms to open up its oil markets.

The long-awaited crude contract would better reflect China's growing importance in setting crude prices, as well as boost the use of the yuan in which it will be traded, although volatile global trading conditions and China's recent interference in stock markets have raised some concerns.

The Shanghai International Energy Exchange, also known as INE, circulated a draft of the futures contract to market participants last month, saying the launch could happen as early as October, the sources who saw the draft, told Reuters.

China, the world's second-biggest oil consumer, has already begun to loosen its grip on the physical oil sector this year by granting quotas for imported crude to privately-owned refiners for the first time, surprising market participants with the speed of reform.

"The development of a futures market is closely linked to the physical market," INE said in a statement issued to Reuters in response to questions about the new contract.

"The more physical players participate, the better the liquidity of the futures market will be."

The launch of Shanghai crude futures won state approval last year and would be the first Chinese contract that allows direct participation by international investors.

A Shanghai-based contract will compete in the crude futures market, which is worth of trillions of dollars and is dominated by two contracts, London's Brent, seen as the global benchmark, and WTI, the key U.S. price.

Oil traders said Chinese crude futures would eventually compete against Brent, which is priced off small and declining oil fields in the British North Sea, and can be affected by factors with no relationship to Asia.

INE said that it aimed to have overseas investors, oil companies, and financial institutions participating in its crude futures trading.

"If China's crude futures don't immediately attract enough liquidity and markets are still as volatile as now, then traders could get really burned and would quickly stop trading Chinese crude futures," said one oil trader, who would likely start dealing Chinese crude futures.

Recent market interference was also a concern, although he noted China's iron ore and coal futures markets were running smoothly despite similar price routs to oil.

For futures to work, traders need a widely traded physical market from which prices for futures contracts can be derived.

"These changes are coming much faster than we anticipated," said an official with one of the big three state-owned energy companies. "Reforming and opening up the oil market is the new fashion in Beijing."

The government has so far granted a total of seven independent refiners quotas for 715,800 bpd of imported crude, roughly 11 percent of the total crude imports, and more are likely to follow.

Ohio’s Utica Shale has record-breaking second quarter

Second quarter production in Ohio’s Utica Shale was record-breaking, according to The Columbus Dispatch.

During the three month period, 5.6 million barrels of oil and 222 billion cubic feet of natural gas were produced. These numbers are up from 4.4 million barrels of oil and 184 billion cubic feet of natural gas produced during the first quarter of 2015.

The recent Ohio Department of Natural Resources report shows that the state’s top oil wells are located in Guernsey County and the top gas wells are located in Belmont County.

OPEC magazine op-ed that fueled oil rally baffles insiders

An OPEC publication written by the exporter group's public relations team helped oil prices jump and prompted speculation over a possible shift in output policy - to the bafflement of some OPEC insiders.

The commentary on Monday in the OPEC Bulletin, a magazine issued by OPEC's Vienna headquarters, said downward pressure on prices due to higher production "remains a cause for concern" and OPEC "stands ready to talk to all other producers".

While the 799-word article helped add another 8 percent to oil's three-day surge, by Tuesday it seemed clear there was no sign of a significant shift in OPEC policy or any indication of a fresh push to shore up markets, analysts and OPEC insiders said.

A Gulf delegate said the Bulletin reflected genuine concern in the Organization of the Petroleum Exporting Countries about falling prices but it did not signal a policy shift or pending production cut.

"I see it as a message sent to the market that we are willing to talk to non-OPEC, we are concerned about prices and we are not closing our eyes to what's going on ."

Another OPEC insider said: "I found it surprising," referring to the jump in prices on Monday. "The Bulletin wasn't saying anything new."

The Bulletin, a glossy magazine, is written by OPEC's PR department based in Vienna and lists 12 editorial staff. It is reviewed by senior officials at the OPEC secretariat before publication.

In the magazine, the following disclaimer appears under the heading "editorial policy": "The contents do not necessarily reflect the official views of OPEC nor its member countries."

While the Bulletin has included similar commentaries on the market before - in April it criticised unidentified non-member countries for not cooperating in propping up prices - it does not tend to move oil prices.

Traders are wondering whether OPEC and its de-facto leader Saudi Arabia will stick with the policy adopted in 2014 of defending market share, even after the slide in oil prices to their lowest in more than six years last month.

While Saudi Arabia has not commented publicly, some had seen the Bulletin as indicating a shift.

"Yesterday the market got somewhat excited by the editorial of the OPEC Bulletin," said Olivier Jakob, oil analyst at Petromatrix. "This was read by some market participants as making a first overture for a change of policy."

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Oil producer Penn West to cut jobs, capex and suspend dividend

Canada's Penn West Petroleum Ltd cut its 2015 capital budget and said it would suspend its dividend and reduce its workforce by 35 percent, helping it save about C$140 million ($106 million) as it copes with the slump in crude oil prices.

The oil and gas producer also said it would lower its well drilling and operating costs, and that its board had voluntarily cut the annual retainers payable to non-management directors to help shore up finances.

The company is the latest oil and gas producer to cut capital spending plans and find ways to lower costs as they struggle to cope with slumping crude prices, which have more than halved since June last year.

Lower costs had helped Penn West report a smaller-than-expected loss in the second quarter.

The company, which has been selling assets to reduce debt, will continue to look for more opportunities to reduce capital spending this year, it said in a statement on Tuesday.

Penn West, which has reserves in Alberta, British Columbia, and Saskatchewan, Manitoba and the Northwest Territories, lowered its 2015 capital spending forecast by 13 percent to C$500 million.

The revised forecast is 40 percent lower than the company's initial estimate of C$840 million set in November. Since then Penn West had cut its forecast twice, in December and in July.

Penn West said it would lay off about 400 employees and contractors, with most of the job cuts at its head office in Calgary, Alberta. It had about 1,120 employees as of Dec. 31.

The company said it expects to save about C$45 million per year due to the reductions, for which it will record a charge in the current quarter.

Penn West had in March slashed its quarterly dividend to 1 Canadian cent per share from 14 Canadian cents. It said on Tuesday that it expects to save about C$20 million by suspending the payout altogether from the quarter starting October.

The company said its board had voluntarily lowered the annual retainers for non-management directors. The chairman's retainer will be halved, while the retainers for the remaining non-management directors will be reduced by 40 percent.

Penn West said it had cut its absolute operating costs by more than 20 percent over the last 18 to 24 months. It expects to cut costs a further 10 percent and lower well costs by 10 percent.

The company cut its 2015 production forecast to 86,000 to 90,000 barrels of oil per day (boepd) from 90,000 to 100,000 boepd.

ConocoPhillips reports first oil at Surmont 2 oil sands facility

ConocoPhillips has delivered first oil at its Surmont 2 in-situ oil sands facility in Canada, the company said Tuesday.

Construction of the Surmont 2 facility, the largest single-phase steam-assisted gravity drainage (SAGD) project ever undertaken, began in 2010.

Earlier this year, ConocoPhillips announced first steam, the initial step towardsproduction. Since that milestone, steam has successfully heated the reservoir to a point where the well pairs can be converted to a SAGD configuration and allows the oil to flow. Production was declared once the inspected product was successfully routed to sales tanks.

Production will ramp-up through 2017, adding approximately 118,000 bopd gross capacity. Total gross capacity for Surmont 1 and 2 is expected to reach 150,000 bopd.

“The oil sands are an important part of our portfolio,” said Ryan Lance, chairman and CEO. “We’re pleased to see a project of this magnitude move from the capital phase to theproduction phase, knowing that it will produce for decades to come.”

The Surmont project is located in the Athabasca Region of northeastern Alberta, Canada, approximately 35 miles southeast of Fort McMurray. Surmont is operated by ConocoPhillips under a 50/50 joint venture agreement with Total E&P Canada.

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W&T Offshore Announces Sale of its Yellow Rose Field in the Permian Basin

W&T Offshore, Inc. today announced that it has entered into a definitive agreement with Ajax Resources, LLC for the sale of all of its interest in its Yellow Rose field in the Permian Basin. Gross pre-tax proceeds from the transaction are expected to be approximately $376,100,000, subject to customary closing adjustments. W&T also reserved a one to four percent sliding scale overriding royalty interest in the field. The transaction is expected to close during the third quarter of 2015, with an effective date of January 1, 2015.

W&T's interest in its Yellow Rose field includes approximately 25,800 net acres in Andrews, Martin, Gaines, and Dawson counties in West Texas. For the month of July 2015, net production from the Yellow Rose field averaged approximately 3,000 barrels of oil equivalent ("Boe") per day.

We will use the proceeds from the transaction to pay down the outstanding balance under our secured revolving credit facility and provide additional liquidity for future operations and acquisitions.

Tracy W. Krohn, W&T Offshore's Chairman and Chief Executive Officer, stated, "We are pleased to be monetizing our highly valued Permian Basin acreage. This sale will allow us to strengthen our balance sheet and improve our financial flexibility to pursue the acquisition of Gulf of Mexico assets while valuations are favorable. We believe that current conditions are good for W&T to identify quality offshore producing assets that offer upside exploration and development opportunity. "

Saudi Arabia in dilemma over Asia crude oil prices next month

A strong Dubai price has again put top oil exporter Saudi Arabia in a dilemma over whether to raise the prices of crude it sells to Asia to match the benchmark’s strength, or to cut to stay competitive in an oversupplied market.

Record purchases of October-loading crude by Chinaoil during a mechanism that sets the price of Middle East crude in Asia strengthened the benchmark, even as other grades are being pressed lower by a global glut.

Saudi Arabia is due to release October crude prices later this week, setting the trend for Iranian, Kuwaiti and Iraqi crude bound for Asia.

“The Dubai market is acting very erratic and it’s been moving in such a way that’s not reflecting underlying fundamentals,” a source with a Gulf oil producer said.

“Producers are walking on a thin line, but they can change and might need to lower or soften the price a little bit.”

If state oil giant Saudi Aramco keeps to its monthly price formula, the official selling price (OSP) for Arab Light should edge up in October from a month ago, a survey of five refiners showed.

Still, it may opt to cut prices to defend its market share in Asia, traders said.

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Russia says oil output could decline if prices stay low

Russia will not deliberately cut oil production to prop up prices, however its output may decline if prices remain low, local news agencies quoted Deputy Prime Minister Arkady Dvorkovich as saying on Tuesday.

He also said that Russia was ready to discuss measures aimed at oil price stabilisation with the Organization of the Petroleum Exporting Countries (OPEC) and other key producers, TASS news agency reported.

"It's quite possible that if oil prices remain at the low levels for long, oil production could decline, as had been the case before. Anyway, we don't expect any significant cuts," Dvorkovich said according to TASS.

Oil prices almost halved from last year mainly due to oversupply.

OPEC kingpin Saudi Arabia, in a strategy designed to squeeze out rivals, such as U.S. shale oil firms, has been reluctant to cut oil output in order to support prices.

Russian President Vladimir Putin and his Venezuelan counterpart Nicolas Maduro will discuss "possible mutual steps" to stabilise global oil prices when both visit China this week.

OPEC and Russia, one of the world's biggest oil producers, have held regular meetings but have not agreed on any coordinated action to prop up falling prices.

Dvorkovich reiterated that it would be technically difficult to restore oil production in Russia if output is cut artificially.

Russia has been pumping oil at a post-Soviet high of more than 10.7 million barrels per day and expects to maintain high levels of output next year.

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Fire damages Canadian Syncrude equipment, forces firm to halt production

Canadian Oil Sands, the main owner of the giant Syncrude oil sands project, has halted production after the fire that damaged equipment at its synthetic crude oil processing facility in northern Alberta.

The company said the fire, which happened early Saturday and was extinguished without any injuries, affected pipes connected to a water treatment unit at Syncrude’s heavy oil upgrader on the site of its Mildred Lake oil sands surface mine. The cause of the blaze remains under investigation.

The operation is a 326,000 barrel-per-day mining and upgrading project, where oil sands bitumen is upgraded into refinery-ready synthetic crude.

Aside from plunging crude-oil prices, Canadian Oil Sands is facing a number of other challenges. It recently swung to a loss and was affected by unplanned equipment outages and Moody’s Investors Service’s decision to cut its credit rating last week.

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LNG carrier Echigo Maru, which was set to deliver a cargo from Indonesia's Bontang facility to Japan's Kyushu Electric, is heading south after idling around Japan as the utility has limited tank space to receive the cargo, market sources said Monday.

The vessel loaded the cargo from Bontang, Indonesia, on August 15 and had Oita, Kyushu, as its final destination. It sailed up the Sea of Japan coast and was now near Taiwan, Platts ship-tracking software cFlow showed Monday.

The LNG cargo it is carrying was due to arrive at Kyushu Electric's Oita terminal on September 14, cFlow showed. But the cargo will likely be diverted to another destination, pending permission from Bontang, a source said.

Kyushu Electric's 890 MW Sendai No 1 nuclear power unit has restarted and the output capacity reached 100% Monday, the company said earlier.

Power demand in Japan has been also falling.

Kyushu Electric said last week that its overall power sales fell 2.6% year on year to 6.53 billion kWh in July due partly to cooler temperatures depressing demand for air-conditioning.

The Sendai reactor connected to the electricity grid on August 14, making it Japan's first unit to come back online under stricter safety standards implemented by the country's Nuclear Regulation Authority following the Fukushima I accident in March 2011.

A Corner of the Oil Market Shows Why It's So Tough to Read China

State-run China National United Oil Corp., a unit of the country’s biggest energy company, bought 36 million barrels of Middle Eastcrude last month as part of a pricing process in Singapore used to determine commodity benchmarks around the world. While thepurchases by the trader known as Chinaoil were unprecedented, what’s more unusual is that the seller of most of those cargoes was another government-owned trading company called Unipec.

“It’s unsettling and confusing for other players, and defies market logic,” Victor Shum, vice president at IHS Inc., an Englewood, Colorado-based industry consultant, said by phone from Singapore.

The record buying in Singapore was part of the market-on-close price assessment process run by Platts, a unit of McGraw Hill Financial Inc., where bids, offers and deals are reported by traders through e-mails, instant messages and phone conversations in a fixed period each day. These are used to create end-of-day price assessments for various commodities and form benchmarks for transactions globally.

“Chinaoil and Unipec each have their own trading book and strategy,” Ehsan Ul-Haq, a senior market consultant at KBC Advanced Technologies, said by phone from London. “The Chinese government will not hinder free trading.”

The trading activity in Singapore sent prices of contracts used to hedge against Middle east benchmark Dubai crude cargoes loading in October above those for shipments sailing a month later, according to IHS’ Shum. This market structure called backwardation typically signals that demand is outpacing supply.

Meanwhile, other benchmarks including Brent are reflecting the current global glut because they’re in contango, where near-term supplies cost less than later deliveries. This disparity between the Middle East grade and the rest of the market makes it difficult to assess oil demand, according to Shum.

“It’s very odd that these two companies are up against each other, pushing front-month Dubai inter-month spreads into backwardation when other benchmarks like Brent are in contango,” said Shum.

Chinaoil purchased 72 crude cargoes for loading in October as part of the Platts pricing process last month, most of which were sold by Unipec, a unit of China Petroleum & Chemical Corp., or Sinopec, Asia’s biggest oil refiner. Swiss trader Mercuria Energy Group Ltd. was the only other buyer in August with 6 lots, according to data compiled by Bloomberg.

Petrobras raises cooking-gas price 15 pct; 1st rise in 13 years

Brazil's state-led oil company Petrobras said late Monday that it would raise the wholesale price of liquefied petroleum gas (LPG) by 15 percent effective Tuesday, the first price adjustment for the essential cooking gas in 13 years.

Earlier on Monday Reuters reported that Petrobras had informed distributors of the gas-price increase, which is effective for delivery at the refinery gate at 0:00 a.m. (0300 GMT) Tuesday.

The move is part of efforts by Petroleo Brasileiro SA , as Petrobras is formally known, to reduce losses on fuel sales, a Petrobras source said, requesting anonymity because of a lack of authorization to speak to the press.

The increase also comes as Brazil's government struggles to cut spending, hold down inflation and restart an economy hamstrung by a plunge in world commodity prices and a corruption scandal that has partly paralyzed its oil industry and major construction firms.

"With retail prices uncontrolled, the market will have freedom to fix them and the increase at the refinery will increase pressure on the cost of LPG for consumers," Sindigas, a national association of LPG distributors, said in a statement.

The gas, sold in standard and ubiquitous steel bottles holding up to 13 kilograms of LPG, is essential for cooking and heating for millions in Brazil without access to piped natural gas or steady electricity supplies.

Because of its importance to many lower-income families and relatively large position in Brazil's benchmark consumer price index, the price of LPG for residential consumers has long been controlled by the government.

It is one of three fuels, along with gasoline and diesel, that Petrobras has long been forced to partly subsidize, causing losses for its refining division.

With Petrobras' refineries only able to supply 60 percent to 65 percent of the domestic needs for the fuel, which is essential to tens of millions of Brazilians, Petrobras must import much of Brazil's LPG at a loss.

The Petrobras source said the impact on consumers will be minimal, resulting in a final retail increase in the cost of gas of 3 percent to 4 percent, or about 2 reais (55 cents).

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EIA revises US oil production estimates lower; June output sank

The federal government believes daily U.S. crude production fell to 9.3 million barrels in June, down by 100,000 barrels in the prior month, as low oil prices continue to discourage drilling.

The Energy Information Administration said Monday its monthly report on domestic oil supplies, slated to be released in full soon, will use a new approach to collecting production data. Instead of relying largely on state agencies to provide data, it has begun to survey oil companies that drill in 15 states including Texas and the Gulf of Mexico. It’s an effort to improve the accuracy of its monthly estimates of the nation’s oil output.

This has led it to revise its monthly production data for January through May downward by at least 40,000 barrels a day and up to 130,000 barrels a day, with the biggest declines coming from Texas. There was also an uptick in production from the Gulf of Mexico.

Texas’ daily oil production, the EIA said, were revised downward by 100,000 barrels to 150,000 for the first five months of the year. Producers in the Gulf put out 10,000 to 50,000 barrels a day more than the EIA had previously estimated from January to May. The overall average for the year came in at 9.4 million barrels a day.

The agency said it based its previous estimates on tax information and state agencies but “given the timetable for EIA’s data products, much of that information is lagged and incomplete at the time of publication.”

Surging domestic crude production from shale formations in Texas and North Dakota played a big role in the oil-market crash over the past year, but in recent weeks, economic weakness in China and increasing oil supplies from Saudi Arabia and Iraq have overshadowed U.S. crude production as narratives in the market.

The Organization of Petroleum Exporting Countries have put out 1.5 million barrels a day of additional crude into the market, according to Houston investment banking firm Simmons & Co. International, making any production declines in the United States largely negligible. But “we maintain U.S. oil supply still matters in the equation,” analysts at Houston investment banking firm Tudor, Pickering, Holt & Co. wrote in a note to clients Monday.

The EIA said its new oil-company surveys will account for more than 90 percent of U.S. output. Outside of the surveys it collects in 15 energy-producing states, it brings in data from the other 35 states as well through its old methodology.

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Qatar sends more LNG to Belgium

Fluxys-operated Zeebrugge LNG terminal is scheduled to receive its second cargo of the chilled gas in September from Qatar.

The 159,983 cbm Yari LNG carrier set off from Qatar’s Ras Laffan on August 27. As shipping data shows the vessel is scheduled to dock at the LNG terminal’s jetty on September 11.

The Zeebrugge LNG terminal has an annual throughput capacity of nine billion cubic meters of natural gas importing the liquefied natural gas mainly from Qatar. It can receive 110 carriers per year and serves as a gateway to supply LNG into Northwestern Europe.

The terminal consists of 4 LNG tanks totaling 380,00 cbm, a truck loading station, an existing jetty with one more jetty under construction and due to be completed this year.

Berkshire Wagers That Americans Still Thirst for Gasoline

In its most significant energy investment in two years, Berkshire has amassed a $4.5 billion stake in Phillips 66, making it the biggest shareholder in the largest U.S. oil refiner. Berkshire owns almost 58 million shares in Phillips 66, more than 10 percent of the total outstanding, up from the 7.5 million it reported at the end of the first quarter, according to a regulatory filing issued late Friday by the Omaha, Nebraska-based company.

Phillips 66 climbed 2 percent to $78.78 at 10:25 a.m. in New York, the best-performing energy company on the Standard & Poor’s 500 Index Monday. The bet on fuel processing is a wager that an unexpected and significant rally by refiners during the shale boom will continue as low oil prices spur demand for gasoline, diesel and other petroleum products produced by the so-called downstream sector. Since oil fell by half last year, gasoline demand in the U.S. has surged to an 8-year high, as drivers see per-gallon prices fall below $3 and take to the road.

“As oil prices have dropped, it’s obvious to people in the business that refiner stocks are your best bet,” Carl Larry, head of oil and natural gas for Frost & Sullivan LP, said by phone from Houston. “When people say the oil industry is failing -- well, upstream might be, but downstream has never been better.”

An index of four refiners on the Standard & Poor’s 500 is up 12 percent this year through Friday, compared with the larger energy index, which is down 18 percent. Phillips 66 closed at $77.23 on Friday in New York, up 7.7 percent this year. The increase at Phillips 66 has trailed the results of some other U.S. refiners -- Valero Energy Corp. has gained 19 percent this year and Tesoro Corp. has climbed 26 percent. Marathon Petroleum Corp. is up 4.6 percent for the year.

Rosneft Profit Exceeds Estimates as Ruble Offsets Oil Price

OAO Rosneft, Russia’s largest oil producer, said second-quarter profit fell less than analysts expected as a weaker ruble helped counter a slump in crude prices.

Net income declined to 134 billion rubles ($2 billion) from 171 billion rubles a year earlier, the Moscow-based company said Monday in a statement on its website. That beat the 95.5 billion-ruble estimate of five analysts surveyed by Bloomberg. Revenue dropped 8.6 percent to 1.31 trillion rubles.

Brent crude has fallen more than 50 percent in the past year after the Organization of Petroleum Exporting Countries chose to defend market share over supporting prices amid a production glut. Russian oil producers have benefited from lower service costs as crude, the country’s biggest export, weakens the ruble.

Capital spending in rubles rose almost 14 percent to 269 billion rubles in the first half, Rosneft said.

Rosneft increased drilling in the first half of the year as crude output fell 1.1 percent. Production at its largest unit, Yuganskneftegas, rebounded in the second quarter, but was still down 3.4 percent in the first half.

Natural gas output climbed 16 percent to 1.05 million barrels of oil equivalent a day, pushing total oil and gas production to an average 5.175 million barrels a day in the first half.

Net debt fell 7.9 percent in the second quarter to $39.9 billion, according to the statement. Rosneft reimbursed $1.3 billion worth of advance payments for supplies, which it accounts for separately from debt, in the first six months of the year.

Asian LNG price faces steep fall as perfect storm brews

Asian liquefied natural gas (LNG) prices could fall a further 25 percent in coming months as new supply, falling demand and weaker oil prices put it on par with iron ore and coal as the worst performing commodity of recent years.

Asia's LNG market has already fared worse than slumping oil markets, with spot prices LNG-AS down 60 percent since 2014 to $8 per million British thermal units (mmBtu), ending half a decade of high prices.

While crude demand remains strong, research group Energy Aspects estimates Asian LNG imports fell 8.5 percent in the first half of 2015 from the same time last year, as the region's economies slow.

Add to the mix El Nino, which usually means milder winters in northern Asia, and a unique cocktail for falling prices may appear.

"The traditional power houses in north Asia are all showing signs of (demand) weakness at a point when there is lots of supply coming on to the market," said Neil Beveridge of Bernstein Research.

China's LNG imports have slumped from double digit growth in recent years to a three percent fall in the first half of 2015 from a year earlier.

For Japan, the world's top LNG importer, the restart of its nuclear power plants is eating away at LNG's market share in an environment of generally falling energy demand.

Imports into South Korea have also fallen due to a slowing economy and rising nuclear power output.

The slowing demand comes just as output soars. Following $200 billion of investments into LNG projects, Australia's exports are soaring, tripling its capacity to 86 million tonnes before 2020, which would make it the world's biggest LNG exporter ahead of Qatar.

Australia's soaring output comes at the same time as the United States starts exporting for the first time towards the end of this year.

A 25 percent fall in oil prices since June is adding to LNG weakness.

"The latest leg down in oil prices is in the process of feeding through into gas prices," consultancy Timera Energy said, as oil-indexation in LNG contracts meant crude movements would be priced into LNG with several months delay.

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Alberta to keep oil, gas royalty framework to end-2016

Alberta's oil and gas royalty framework will remain in place until the end of 2016, Energy Minister Marg McCuaig-Boyd said on Friday, as she gave details on a review of the scheme for the province's new left-leaning New Democrat government.

McCuaig-Boyd said royalty rates paid by oil and gas companies will not change until 2017, which will help companies budget for the important winter drilling season.

The review, an election campaign promise, has unsettled oil and gas industry representatives who warn it could lead to higher costs and job losses in Canada's energy heartland. The New Democrat government says it is needed to give Albertans a fair value for the resources.

"For 16 months companies and investors can operate with certainty, knowing there will be no changes in the royalty framework. If and when changes are made, any incremental revenues will go to the (province's) heritage fund," she told a news conference.

The government also announced that Leona Hanson, mayor of the town of Beaverlodge in northern Alberta, Peter Tertzakian, chief energy economist at energy-focused private equity company ARC Financial Corp, and Annette Trimbee, president and vice-chancellor of the University of Winnipeg and former senior Alberta bureaucrat, would join the panel leading the review.

Alberta appointed Dave Mowat, the chief executive of the provincially owned financial services agency ATB Financial, in June to lead the review and report to government by January.

McCuaig-Boyd said panel members needed to be "tough" in order to deliver effective solutions that do not stand in the way of a recovery during an economic downturn, but provide the full value of the resource during boom periods.

Oil and gas companies in Alberta, home to vast oil sands deposits and the largest source of U.S. crude oil imports, have laid off thousands of workers in recent months due to slumping global prices.

Canada's biggest oil and gas industry lobby group, the Canadian Association of Petroleum Producers, estimates recent government moves to increase carbon levies and corporate income tax rates would increase costs by about C$800 million ($618.33 million) over the next two years. Tim McMillan, the association president, said in an interview that the government should pursue policies that encourage more investment and development in Alberta.

Alberta's royalty rates can now vary between 5 and 40 percent depending on factors that include type of development, oil prices, crude volumes, well depths and speed of cost recovery.

U.S. oil drillers add rigs for the 6th week in a row

U.S. energy firms added one oil rig this week, the sixth consecutive week of increases even as U.S. oil prices flirted with 6-1/2-year lows, signaling further pressure on a market awash with crude.

Reflecting plans announced in May and June, when U.S. crude futures averaged $60 a barrel, drillers added one oil rig in the week ending on Aug. 28, bringing the total count up to 675, the highest since early May, oil services company Baker Hughes Inc said on Friday in its closely followed report.

"It's getting real close to the end of the increases, given the drop in oil," Phil Flynn, an analyst with the Price Futures Group, said. "I would not bet that the increases will last."

After slashing their rigs by up to 60 percent in the first half of this year, some companies decided to begin drilling more in the second quarter as oil prices stabilized at around $60 a barrel.

U.S. oil prices were headed for their first positive week since mid-June, rallying from multi-year lows of below $40 hit earlier in the week.

U.S. crude oil futures have fallen by as much as 21 percent in the past month and were down this week by as much as 37 percent from their six-month high of $61.43 in early June.

U.S. crude futures fell from over $107 in June 2014 to near $42 in March due to oversupply worries and uninspiring demand growth.

In response to that 60 percent price collapse, U.S. drillers eliminated thousands of jobs and idled 60 percent of the record high 1,609 oil rigs that were active in October.

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Eni's credentials boosted by giant gas find in Egypt

Eni's "supergiant" gas find off the coast of Egypt bolsters its top-flight exploration credentials and gives the Italian energy group access to easy reserves that fit its strategy of seeking growth without sacrificing dividends.

Eni said on Sunday that its discovery ranked as the largest known gas field in the Mediterranean, covering an area of about 100 square kilometres (39 square miles) and containing a potential 30 trillion cubic feet (tcf) of gas.

Eni, already Africa's biggest oil and gas explorer, was the first oil major to cut its dividend after a plunge in global oil prices. It is looking to reduce its stake in its Mozambique gas discovery and does not rule out doing the same for its latest find, dubbed Zohr.

"It's an open door to give value and solidity to Eni's balance sheet," CEO Claudio Descalzi said of a potential Zohr stake sale in an interview published on Monday by Italian newspaper La Repubblica.

"But it will not be a necessary outcome. There is much less to spend than in Mozambique and the new gas is aimed at the local domestic market, with prices disconnected from those of oil, which today are at six-year lows."

In July Egypt raised the price it pays Eni for the natural gas it produces, part of its initiative to encourage investment in the energy-hungry country.

The company's initial investment in Zohr will be about $3.5 billion, an Egypt official said, though the country's state gas company said that the total could stretch to twice that figure.

"With the full completion of development for the field, investments will (reach) $7 billion," the head of EGAS, Khaled Abdel Badie, told Reuters on Monday.

The good quality of gas discovered at Zohr and the field's proximity to the shore and existing pipeline infrastructure makes it relatively easy and cheap to develop, especially compared with the more remote discoveries off Mozambique, which had to be developed from scratch.

The new African find could also help to meet Egypt's gas needs for decades and pose a challenge to other projects in Egypt, Israel and Cyprus. Falling production and rising gas demand has forced Egypt to become a net importer in recent years.

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Russian oil firms are increasing their rouble profits and raising production as a weak currency protects their business, which has turned into one of the world's most profitable.

Russia has kept its production, which includes gas condensate, near post-Soviet highs as its producers benefit from getting the bulk of their export revenues in dollars while most of their expenditure is in the domestic currency.

Goldman added that current valuations offer an attractive entry point into the sector, upgrading Bashneft, Gazprom Neft and Rosneft to 'buy' and forecasting Russian oil output to grow by 1.1 percent this year.

Alternative Energy

Japan: Solar reaches 10% of peak summer power

Solar power generation made up some 10% of the peak summer electricity supplies of Japan’s nine major utilities, the Ashai newspaper reported on Thursday.

While solar power contributes only about 2% of annual power generation in the country, sunny skies throughout the summer increased power output, generating a total of some 15 GW of power in early August.

Japan has invested billions of dollars in renewable energy since 2012, when it introduced a feed-in tariff (FIT) program in an effort to reduce its reliance on nuclear power in the wake of the 2011 Fukushima catastrophe.

According to the Asahi report, the ratio of solar power at peak hours ranged from 5.9% at the Hokuriku Electric Power utility to as high as 24.6% at Kyushu Electric Power.

Installed solar capacity benefitting from the country’s FIT scheme reached more than 24 GW at the end of April, according to government data, up from about 5 GW before the program was launched.

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Apple just signed a patent for a battery that could last weeks

Apple has filed a renewed patent for a fuel cell battery that could power its devices "for days or even weeks", a potential step on the way to ending battery life issues.

The patent application, published by the US Patent and Trademark Office, describes a "portable and cost-effective fuel cell system for a portable computing device" that could use a number of different energy sources to provide long-term power.

Filing the new patent is probably a routine legal procedure, rather than suggesting any imminent application of the idea. Apple filed patents on the same subject several years ago, and often patents ideas that do not end up in their products.

While the new patent application, which suggests a number of different energy sources from sodium borohydride to liquid hydrogen, varies little from its previous filings, its renewal could suggest that Apple is still interested in the idea.

The filing says fuel cells "can potentially enable continued operation of portable electronic devices for days or even weeks without refueling".

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Tesla Signature series Model X to begin delivery Sept 29

Tesla Motors Inc said on Wednesday it would begin delivering its first luxury electric crossovers, the Model X Signature series, on Sept. 29 to customers who have already reserved the sport utility vehicles.

The premium-priced special version of the Model X, eagerly awaited since it was announced in early 2012, will be priced between $132,000 and $144,000, a Tesla spokeswoman said.

Chief Executive Officer Elon Musk tweeted that the first production cars would be handed over Sept. 29 at the company's factory in Fremont, California.

It is customary for automakers to debut higher-priced versions of their cars before introducing standard models.

Tesla has been spending heavily ahead of the launch of the Model X, its first battery-powered SUV to follow the Model S sedan to market, even as it develops a cheaper, mass-market vehicle starting at $35,000, the Model 3.

Musk tweeted that the Model 3 would begin production in "about two years."

The limited-edition Signature series cars, which will be available in a unique red color not offered for the standard Model X, include such features as self-parking and enhanced sound. Optional add-ons include packages for subzero weather or towing.

Southern Power buys biggest solar project to date

Southern Power bought controlling interest in the 300-megawatt Desert Stateline Facility in California from First Solar Inc.(NASDAQ: FSLR) for an undisclosed amount.

The project become the Atlanta-based Southern Co. unit’s largest solar asset and follows Tuesday’s news Southern Power bought a controlling interest in Recurrent Energy’s 200-megawatt Tranquillity Solar Facility in California.

Southern Power’s seventh solar acquisition in California, the Desert Stateline Facility, will be on 1,685 acres of federally managed public land in San Bernardino County and is expected to have 3.2 million of First Solar’s thin-film photovoltaic solar modules mounted on fixed-tilt tables. Once operational in the third quarter of 2016, the Desert Stateline Facility is expected to generate enough electricity to help meet the energy needs of nearly 100,000 average homes.

“The acquisition of our system’s largest solar facility builds on our proven reputation as a national renewable energy leader,” said Southern Co. Chairman, President and CEO Thomas A. Fanning, in a statement. “By continuing to leverage Southern Co.’s and First Solar’s complementary strengths, we are accelerating the development of solar as an important component of a diverse fuel mix now and in the future.”

Southern Power has announced, acquired or is building more than 1,450 megawatts of renewable ownership with 20 solar, wind and biomass projects.

New graphene supercar will do 0-60 in 2.2 seconds – and it runs on water

A revolutionary new electric supercar – powered by wonder material graphene and do 0-60 in 2.2seconds – is being developed by engineers in the United States.

The car will have a simple to use graphene integrated hydrogen fuel cell being developed by Sunvault Energy and the Edison Power Company.

The companies have agreed to build the electric supercar – named the Edison Electron One – to showcase the graphene energy storage system and will be built by the newly incorporated company Edison Motor Cars.

It is expected to be ready by the first quarter of 2016 and be rechargeable in five minutes, subject to power availability at charging stations.

The car’s speed and economy will come from a uniquely designed power system of a electric drive unit for each wheel.

According to the developers, this will give it unequalled traction control of close to 1,355NM of Torque, which is almost double that of a Ferrari 488 GTB, and a third more than that of the Tesla P85D and slightly more than the Porsche 918 Spyder hybrid which is 1,32NM.

“The fuel cell will be powered by an on-demand hydrogen generation unit built into the car and will only require water“ commented Dr Robert Murray-Smith, director of Sunvault Energy.

The companies will be collaborating with Canadian motorsport constructor MK Technologies – a specialist in the design and creation of performance cars.

The makers claim the car will perform to the same level of other competitive electric cars with the exception of being able to get much more of a charge in five minutes.

The most important safety feature is that there will be no risk of fire or explosion associated to lithium ion batteries.The cars will be available to customers on a special order basis only – cost has yet to be announced.

“We are excited to be producing this truly revolutionary automobile that will put our Graphene Energy Storage Device front and centre on the world stage at the simple turn of a key”, stated Monaghan.

The Electron One will not only be able to challenge any vehicle in performance, but will also be fully flexible, functional and convenient just as a fuel filled vehicle is today,” he added.

Graphene was invented by British scientists at Manchester University in 2004.

It is ultra-light and flexible yet 200-times stronger than steel and is fire-resistant yet retains heat. It is claimed to be the most conductive material on earth and is one million times thinner than a human hair.

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US clean energy suffers from lack of wind - FT

A lack of wind is making the US clean energy sector sweat, with consequences for investors from yield-hungry pensioners to Goldman Sachs.

Electricity generated by US wind farms fell 6 per cent in the first half of the year even as the nation expanded wind generation capacity by 9 per cent, Energy Information Administration records show.

The reason was some of the softest air currents in 40 years, cutting power sales from wind farms to utilities. The feeble breezes come as the White House is promoting renewable energy, including wind, as part of its Clean Power Plan to counter greenhouse gas emissions.

“We never anticipated a drop-off in the wind resource as we have witnessed over the past six months,” David Crane, chief executive of power producer NRG Energy, told analysts last month.

The situation is likely to intensify into the first quarter of 2016 as the El Niño weather phenomenon holds back wind speeds around much of the US, according to Vaisala, a Helsinki-based weather measurement company.

“We do know that the strong El Niño cycle that we are now in tends to be correlated with below-average continental wind resource, and we also know that meteorological expectations are for the El Niño phase to continue,” Moray Dewhurst, chief financial officer of NextEra Energy, said on a recent conference call.

US wind farms are increasingly owned by so-called yieldcos, spinoffs from power producers that promise steady payments based on contracted electricity sales. Shares of wind-exposed yieldcos such as NextEra Energy Partners, Pattern Energy Group and NRG Yield, controlled by NRG Energy, have declined this year. NRG Yield reduced its earnings forecast due to what it called “unusually low wind production across the fleet”.

Uranium

Fission Uranium sees low cost Saskatchewan mine

Fission Uranium Corp's preliminary economic assessment for its wholly-owned high-grade Triple R deposit at its Patterson Lake South property envisages a open pit–underground mine for an estimated capital outlay of $1.1 billion producing more than 100 million pounds of yellowcake over 14 years.

Fission estimates the hybrid approach utilizing a dyke system will result in operating expenditure of $14.02 per pound U3O8 over the life of mine, making Triple R potentially one of the lowest cost uranium producers in the world.

Spot uranium prices – usually much lower than long-term contract pricing which is the norm in the industry – were last assessed at $36.70. Fission's PEA assumes a long term price of $65 a pound for gross revenues over the life of the mine of $7.7 billion and net revenues of $7.1 billion after provincial royalties and transportation charges.

The $294 million company based in Kelowna, BC in July announced a proposed merger with Denision Mines to combine the richest uranium properties in the region on par with with the high-grade unconformity giants McArthur River, Cigar Lake and Phoenix.

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German plan to close nuclear loophole a blow to utilities

Germany’s government is attempting to change the law with regard to nuclear liability in order to fund its phasing out of the sector, and it’s a move which could prove to be hugely expensive to the country’s utilities.

The government wants to close a legal loophole to prevent utilities from evading a $45bn payment to fund the country's nuclear exit, a copy of the draft law seen by Reuters shows.

E.ON, which has announced plans to spin-off its ailing power plants, threatened legal action on Wednesday if the revision of the law goes ahead.

"Should (the draft) be passed in its current form, we would likely have to take legal action," a spokesman for E.ON said in emailed comments to Reuters.

The current law states energy companies are only liable for spun off companies for five years. The revised law will make them liable for the costs of shutting down and decommissioning power plants, as well as disposing of nuclear waste, for as long as it takes, even if they spin off subsidiaries that own the nuclear entities.

"The five-year period is by far too short. Dismantling a nuclear plant alone usually takes about 20 years," the text of the draft law said. It foresees extending liability until the point at which remaining nuclear waste has been sealed.

Germany's "big four" utilities, E.ON, RWE, EnBW and Vattenfall, have set aside a combined EUR38.5bn to cover the dismantling of their nuclear plants. But there has been concern that they might break up to avoid paying for dismantling the plants - the last of which will be shut for good in 2022 - and the revised law aims to prevent the costs falling on the taxpayer.

Relevant government ministries approved the plans on Wednesday with few changes and the Cabinet will now discuss it, an economy ministry spokeswoman said.

China National Nuclear Power H1 profits soar 150.5pct

China National Nuclear Power Co. Ltd. (CNNP), the country’s first listed company specializing in nuclear power generation, realized net profits at 2.47 billion yuan ($404.1 million) in the first half of the year, soaring 150.45% on year, showed data from the company’s semi-annual report on August 31.

The company posted revenue of 12.9 billion yuan during the same period, up 52.53% on year, despite a slow growth in domestic power use caused by inactive domestic economy over January-June.

Total power output of the company during the same period stood at 36.67 TWh, rising 54.51% from a year ago.

The company has finished 5 overhauls on operating units as scheduled over January-June, accounting for 50% of the annual plan.

According to the report, net profit of the company is forecasted to rise 30-70% on year in 2015.

Crops in India in Dire Need of Rain as El Nino Hurts Monsoon

Parts of the southern, central and western regions are facing moisture stress and need widespread rains in the next two weeks to salvage crops, according to J.S. Sandhu, a deputy director general at the state-run Indian Council of Agricultural Research in New Delhi. That may prove elusive as the monsoon begins to retreat from the north of the country this week, according to the state forecaster.

“Domestic food inflation overall will rise as there will be upward pressure on food prices because of lower rainfall,” Faiyaz Hudani, associate vice president at Kotak Commodity Services Pvt., said from Mumbai on Sept. 2.“The only thing that’s good for India now is the declining global prices of commodities, especially edible oils and the whole oilseeds complex.”

India is poised to import record amounts of palm oil after prices in Kuala Lumpur plunged to a six-year low last month and as a domestic cooking oil shortage widens. Food costs tracked by the United Nations fell for a ninth month in July, the longest slump in more than a decade.

“There’s an overall rainfall deficit in the oilseed growing belt and that will definitely have an impact on the yields,” said B.V. Mehta, executive director of Solvent Extractors’ Association of India. “There will be increase in imports. Fortunately for India, international prices are low.”

Monsoon rainfall, which waters more than half India’s 145 million hectares (360 million acres) of crop land, was below the 50-year average in July and August, and September will be not be any better, according to the India Meteorological Department. Downpour since the start of monsoon on June 1 are 12 percent below the average, department data show.

El Nino this year is the strongest since 1997-98, according Australia’s Bureau of Meteorology. The below-par performance of the monsoon also imperils the outlook of winter crops including wheat, which are mostly irrigated. The water levels at India’s 91 main reservoirs is 58 percent of the capacity as of Aug. 27, less than the 88 percent average of the last 10 years, official data show.

While the area under monsoon crops is little changed this year at 96.8 million hectares, rice, soybeans and pulses in some areas are at risk from a prolonged dry spell, Kotak’s Hudani said. India is the world’s top buyer of lentils and imports may reach a record 4.5 million tons in 2015-16, according to the India Pulses and Grains Association.

Export demand has picked up as prices have fallen but U.S. supplies remain uncompetitive on the global market.

Egypt's government buyer is holding an import tender on Thursday and traders are waiting to see if Black Sea origins continue their clean sweep of sales this season. There was no U.S. wheat offered for sale in the deal.

"No matter what the price, it seems like the U.S. can't do much in terms of export business," said Mike Krueger, president of the Money Farm, a grain market advisory service near Fargo, North Dakota. "You have everyone running for cover."

CBOT December soft red winter wheat was down 11-1/4 cents at $4.67-3/4 a bushel at 11:02 a.m. CDT (1602 GMT) while K.C. December hard red winter wheat dropped 6-1/2 cents to $4.68-1/4 a bushel. Both contracts set fresh lows on Thursday.

The U.S. Agriculture Department on Thursday morning said weekly export sales of wheat for 2015/16 shipment totalled 277,500 tonnes, near the low end of expectations.

CBOT December corn was down 5-1/2 cents at $3.62 a bushel while CBOT November soybeans were off 2-3/4 cents at $8.71-1/4 a bushel.

Forecasts for good weather that will help shepherd both corn and soybean crops toward maturity around the U.S. Midwest have bolstered harvest expectations.

Private analytics firm Informa Economics raised its projections for corn and soybeans on Thursday, the third closely watched company to issue a robust harvest outlook this week.

"Grain markets are moving lower with wheat prices down on ample world supply, while corn and soy face the prospect of the imminent start to the U.S. harvest," said Paul Deane, senior agricultural economist at ANZ Bank.

Attached Files

Precious Metals

Alrosa says may cut diamond prices again as orders fall short

Russian diamond miner Alrosa said clients cancelled half of the orders placed at trading session in July and it was considering a second price cut of the year because of slack demand.

The state monopoly's Chief Financial Officer Igor Kulichik said on Tuesday Alrosa was stockpiling an increased quantity of the gems rather than curb production.

"Cutting production leads to a (relative) rise in costs, so we better grow the stock," Kulichik told a conference call, saying that higher than usual cancellations reflected a wider trend of falling diamond sales also affecting other producers.

Alrosa's diamond stock had grown to 17 million carats, he said, from 14 million at the start of the year.

Kulichik added the company, the world's top producer by output in carats, may cut prices again in the second half of the year after already lowering them by 6 percent earlier in 2015.

Attached Files

Evolution hedges more ounces

Gold miner Evolution Mining has forward sold some 300 000 oz of gold, at an average price of A$1 638/oz, to take advantage of a recent rally in the Australian gold price.

The miner noted on Tuesday that 100 000 oz of the gold would be delivered in the 2016 financial year, with the remaining 200 000 oz to be delivered during the January 2018 to December 2019 period. “We saw this as an opportune time to lock in additional hedging with the Australian dollar gold price trading close to three-year highs,” said FD and CFO Lawrie Conway.

The latest hedge was in addition to an existing hedge covering 521 311 oz, at a price of A$1 562/oz. “Evolution remains strongly leveraged to any potential upside in the gold price with the hedge book accounting for less than 25% of the company’s expected production over the next five years. The additional hedging for 2016 locks in a higher level of near-term cash flow, which will be used to pay down debt at an accelerated rate,” Conway said.

Base Metals

Reuters reported that Arizona-based mining company Freeport-McMoRan Inc said on Wednesday that it is dismissing some 650 workers at its El Abra copper mine in Chile and partially suspending operations at the complex until mid-September as it cuts mining rates in half.

The company said it suspended mining, crushing and stacking operations at El Abra on Tuesday and expects to resume them in mid-September. Operations at the mine's solvent extraction and electrowinning (SXEW) plants will not be affected during the transition period

Freeport said in a statement “Implementing this reduction in the operating rate at El Abra reduces operating costs and near-term capital requirements, and provides a longer mine life for its existing Sulfolix ore reserves with a better opportunity to sell its copper production into an anticipated improved copper market in the future.”

Last week, Freeport, which owns a 51 percent stake in the mine in northern Chile, became one of the first big global miners to announce it was slashing production because of slumping copper prices.

Aurubis flags potential El Nino impact on global copper supply

Image Source: Science IslandReuters reported that European copper smelter Aurubis said that global copper supply could be hit by worsening storms in South America due to an El Nino weather pattern, potentially disrupting output later this year in the world's top two copper mining countries

Aurubis said in a note “Strong rainfall, flooding and earthquakes are predicted for South America. If this occurs, the copper industry in Chile and Peru will be affected by impacts on production.”

Weather bureaus are confirming the return of an El Nino weather pattern this year, with agencies in the United States, Japan and Australia increasing their forecasts for the strength and duration of the event. El Nino, a warming of sea-surface temperatures in the Pacific, can lead to scorching weather across Asia and east Africa but heavy rains and floods in South America.

Heavy rain and winds forced the precautionary closure of some mines in Chile earlier this month, while floods in late March cut Chile's copper production that month and in April.

Chile is expected to produce 4.01 million tonnes of copper in concentrate this year, while Peru is forecast to produce 1.7 million tonnes, accounting for 45 percent of global mine supply.

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PNG copper mine likely shut until Q1 2016 as El Nino set to worsen

Ok Tedi Mining Ltd's Papua New Guinea copper mine is likely to stay shuttered until the first quarter of 2016 as an intensifying El Nino worsens a drought that has cut off river transport links to the project, an executive said.

The state run firm last week put its mine under 'care and maintenance', the latest example of copper mining around the Pacific rim to be hit by changing weather patterns.

"We don't expect to be up and running until the first quarter. It could be as much as a 7-8 month suspension of operations," executive manager for marketing Garry Martin told Reuters in an interview on Wednesday.

The current El Nino weather phenomenon is expected to strengthen before the end of the year, potentially making it one of the strongest since 1950, the World Meteorological Organization said on Tuesday. El Nino can lead to scorching weather across Asia and heavy rains in South America.

The miner, which declared force majeure on its sales contracts on Aug. 17, expects to lose 65,000 tonnes of copper in concentrate if the weather conditions persist, Martin said. It has stood down most of its staff on reduced salaries to conserve capital as it conducts maintenance on the mine.

Analysts say the mine produced about 76,000 tonnes of copper last year.

Low water levels have meant river traffic on the Fly River into Ok Tedi's main river port at Kiunga have been unreliable and have also affected operation of the Ok Menga power station, the mine's main source of power.

European copper smelter Aurubis flagged the potential for El Nino to cut copper supply as worsening storms in South America disrupt output in Chile and Peru, the world's top two copper mining countries.

Heavy rain and winds forced the precautionary closure of some mines in Chile earlier this month, while floods in late March cut the country's copper production that month and in April.

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Asarco curtails Arizona copper output, catching USW off guard

A decision by US copper producer Asarco LLC to curtail operations at its Ray mine in Arizona and shut its Hayden concentrator there was not expected, an official with the United Steelworkers union said Monday.

Citing low copper prices, the Grupo Mexico subsidiary said Friday it would reduce its production by about 67 million lb/year by cutting back on stripping for leaching output at the Ray mine and indefinitely shutting its Hayden concentrator, with the latter move set for October.

"I thought they were in a position to weather the storm," Armenta said in an interview. "Contractually, they have the copper concentrate sold."

Armenta said the company is producing copper for just over $2/lb. Asarco is shutting the concentrator because "they're claiming that's more expensive to operate," Armenta said, adding that 78 employees at the Ray mine lost their jobs on Monday.

Asarco officials could not be reached for comment Monday. But in the Friday statement, the company said its cost structure and current market conditions "require operational adjustments in order to ensure its viability and sustainability, as well as protect its mineral reserves for the longer term."

Asarco said 211 hourly workers could be affected by the Ray and Hayden cuts, adding it had officially notified the union of the plan about a week before.

Asarco said the cuts, combined with a $110 million reduction in capital expenditures for 2015-2016, would "improve the company's overall costs and free cash flow." The company said it would continue to monitor market conditions and could make adjustments, as warranted.

In addition to Ray, Tucson-based Asarco also operates the Silver Bell and Mission copper mines in Arizona. Together, the three mines produce about 400 million lb/year of copper. The company's Hayden smelter in Arizona produces 720,000 tons/year.

Asarco also owns the Amarillo copper refinery in Texas, capable of producing 279.5 million lb/year.

China's 10 nonferrous metal output up 9.4% in Jan-Jul

The output of the ten nonferrous metals gained 9.4% from a year earlier to 29.49 million tons in the first seven months of this year, according to the latest report released by the National Development and Reform Commission (NDRC).

According to the statistics, the country's aluminum electrolytic output grew 12% year on year to 18.33 million tons in the seven-month period, while the output of copper, Zinc and alumina oxide expanded 9.1%, 10.4% and 12% over the previous year to 4.41 million tons, 3.58 million tons and 32.88 million tons, respectively.

Meanwhile, the output of lead shed 3.9% year on year to 2.27 million tons during the seven-month period.

Last month, the average prices of aluminum electrolytic, lead, Zinc and copper futures on the Shanghai Futures Exchange saw a decline to RMB 12,498, RMB 13,141, RMB 15,552 and RMB 41,939 per ton, retreated 3.9%, 1.4%, 6.1% and 6% from a month earlier, respectively.

Union mulling action on job cuts at Freeport Chile copper mine

A Chilean union that represents copper mine workers rejected a move by Freeport-McMoRan Inc to drastically cut staff at its El Abra mine and said on Monday it was considering action.

Last week, Arizona-based Freeport, which owns a 51 percent stake in the mine in northern Chile, became one of the first big global miners to announce it was slashing production because of slumping copper prices.

That would include reducing mining rates at El Abra by about 50 percent to cut and defer costs, and extend the mine's life, the company said.

Over the weekend Freeport began to send out letters announcing the dismissals and refusing to negotiate, said Juana Mejias, who heads the mine's local union, adding that around 700 workers were being fired.

"The situation is complex and a true massacre that they have carried out by dismissing 50 percent of the workforce," she said in a statement on Monday.

However, a spokesman for Freeport said that termination notices had not yet been issued.

"Plans for reductions in the workforce are being developed," he said.

Gustavo Tapia, head of the Chile Mining Federation union, dismissed the fall in the copper price as a "cyclical issue" and said multinational companies had sufficient profits to ride it out.

"In the coming hours we will decide the measures we will adopt as an organization," he said.

El Abra produced around 166,000 tonnes of refined copper last year out of Chile's total 5.7 million, according to figures from state copper commission Cochilco. That placed it just outside the top 10 biggest mines in Chile, which produces about one-third of the world's copper.

Any labour action would be a fresh headache for state-run Codelco, which owns the remaining 49 percent stake in El Abra. Codelco has just resolved a three-week dispute with contractor workers across its operations, which cost some 17,000 tonnes in lost output.

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Power shortages threaten launch of Chinese-run Congo copper mine

Power shortages at a new Chinese-run copper mine in Democratic Republic of Congo could delay the expected October start of production or force output targets to be cut, the mine's deputy director said on Friday.

The Sicomines copper mine, a joint venture between Chinese companies and Congolese state entities in the southeastern mining hub of Kolwezi, is one of Africa's largest with about 6.8 million tonnes in proven reserves.

Chinese firms Sinohydro Corp and China Railway Group Limited are building roads and hospitals worth $3 billion in exchange for a 68 percent stake in the mine. China's state-run Exim Bank are providing most of the financing.

Initial annual production of 125,000 tonnes requires a consistent supply of 54 megawatts (MW) but the national utility company has pledged 15 MW and even then only 10-12 MW is available with interruptions, said deputy director Jean Nzenga.

"Production is set for the month of October of this year," Nzenga told Reuters. "But there are conditions like energy. We need to have energy .... With less (energy) we are going to see what needs to be prioritized."

The mine has secured another roughly 15 MW from southern African countries, including neighbouring Zambia and will try to obtain more next month, Nzenga said.

Work on a 240 MW dam to supply Sicomines has been delayed by red tape and remains at least five years from completion.

Congo is Africa's leading copper producer, having mined 1.03 million tonnes of the metal in 2014. Its chamber of mines has said it expects output to decrease slightly in 2015 due to a power deficit.

Nzenga said Sicomines had not yet been affected by sharp declines in copper prices linked to fears of a slowing economy in China, the world's top industrial metals consumer.

Benchmark copper on the London Metal Exchange was up 0.8 percent at $5,179 a tonne at 1421 GMT on Friday after dropping to six-year lows earlier in the week at $4,885.

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Steel, Iron Ore and Coal

India's GVK wins court fight over Australian coal mine

Green groups lost a fight to stop billionaire Gina Rinehart and India's GVK from building a giant coal mine in Australia, as a court on Friday dismissed an appeal against the state of Queensland's environmental approval for the project.

Conservation group Coast and Country, originally working for three farmers, had sought to have the state environmental approval for GVK-Hancock's 30 million tonnes a year Alpha mine overturned based on the impact it would have on water supply and climate change.

The state Land Court last year ruled that the mine should be approved with strict water management conditions or rejected.

But the green group appealed that decision to the Supreme Court saying the Land Court did not have the right to issue two alternative recommendations and should have rejected the mine outright.

The Queensland Supreme Court dismissed the appeal on Friday.

The ruling eliminated one hurdle for the $10 billion Alpha mine, rail and port project, which has effectively been put on ice until it obtains a mining permit and overcomes a lack of funding due to a slump in coal prices.

"We are pleased the court has clearly ruled that our project has continued to follow and comply with all regulatory and legal processes," GVK spokesman Josh Euler said.

The state government, which wants new mines to be developed in the untapped Galilee Basin to promote jobs, has yet to issue a mining permit for the Alpha project, but has said it would be subject to existing water management rules.

The Supreme Court decision was a blow, said Bruce Currie, one of the farmers represented in the case.

"Justice has not been done. If this mine goes ahead, it risks draining away the groundwater that our lives and businesses depend on," Currie told reporters outside the court in Brisbane.

The Queensland Resources Council on Friday launched an advertising campaign urging communities to sign a petition calling on the state to protect mining jobs against green groups looking to delay new projects.

The Alpha project is 50-50 owned by Rinehart's Hancock Coal and GVK, with a small portion of GVK's stake owned by GVK Power & Infrastructure.

Joy Global cuts 2015 forecast after profit falls 37 pct

Mining equipment maker Joy Global Inc , which gets about 60 percent of its revenue from coal miners, reported a 37 percent fall in quarterly profit and cut its full-year forecast as customers cut spending due to weak prices.

The company also said on Thursday that its restructuring charges could as much as double as it takes additional cost cut measures to cope with falling demand.

Joy Global has cut jobs and lowered production among other measure to try to adapt to the slowing demand that has led to company's revenue declining for the 10th quarter in a row in the three months ended July 31.

The company said it expects additional restructuring charges of $10-$20 million in the current quarter. It had earlier forecast charges of $15-$20 million for the full year.

Joy Global said it expects to earn $1.80 per share in 2015 on revenue of $3.1 billion.

In June, the company had said it expected to hit the lower end of its full-year earnings forecast of $2.50 to $3.00 per share and revenue forecast of $3.3 billion to $3.6 billion.

Analysts on average had expected earnings of $2.43 per share on revenue $3.29 billion, according to Thomson Reuters I/B/E/S.

Coal companies have been hurt by weak demand for thermal coal as utilities have switched to cheap and abundantly available natural gas.

Sluggish demand from Europe and Asia, especially China, has also weighed on prices of metallurgical or steel-making coal.

Joy Global's overall bookings fell 31 percent in the third quarter.

Net income fell to $44.9 million, or 46 cents per share, from $71.3 million, or 71 cents per share, a year earlier. Revenue fell 9.5 percent to $792.2 million.

Rio Tinto Sees Solid Demand for Iron Ore and Steel

Rio Tinto PLC told investors it expects world-wide demand for iron ore to keep growing despite China’s economic slowdown, as the company projected a rising appetite for steel in the years to come.

On Thursday, Rio Tinto forecast 2.5% average annual growth in global steel demand for the next 15 years. Emerging-markets are expected to take on an expanded role, with the miner predicting non-Chinese steel demand will rise 65% by 2030.

While Chinese steel output has waned recently, Rio Tinto said it remained confident in the country’s steel market. It stuck with an earlier projection that Chinese crude steel production will reach about 1 billion metric tons by the end of next decade. China produces roughly half the world’s steel, and its annual production is currently at about 800 million tons.

A global glut of steel and concerns over China’s economic prospects, have hurt prices for iron ore, the biggest ingredient in steelmaking. Last month, BHP Billiton lowered its long-run forecast for peak China steel demand to between 935 million and 985 million tons, from 1 billion to 1.1 billion tons. “We have taken a realistic view,” Chief Executive Andrew Mackenzie said at the time.

BHP is the world’s third-largest exporter of iron ore, behind Rio Tinto and Brazil’s Vale SA, the top supplier.

Rio Tinto argues that although there is a steel glut now, China will need more of the material in the future, as old homes are demolished and replaced with buildings that are taller and more steel intensive. The miner—which outlined its forecasts at a Sydney investor presentation—said it also projects higher exports of steel products and machinery from China to underpin that country’s output of the alloy.

Rio Tinto has been aggressively expanding its iron-ore production in Australia’s Pilbara mining region, drawing ire from smaller rivals and politicians who say the miner and some of its peers are hurting the industry by flooding the market.

The price of iron ore fell to a decade low in July of about $44 a ton, compared with a peak above $190 in 2011, and some analysts think it will tumble to a fresh nadir as Australian shipments of the commodity continue to rise. Goldman Sachs forecast prices to fall a further 30% over the coming 18 months.

Rio Tinto said that despite “ongoing volatility in global commodity markets,” it expects “growing global demand for high-quality iron ore.” On Thursday, the miner forecast world iron-ore demand to rise to 3 billion tons in 2030, an average 2% annual rise between now and then.

Rio should produce roughly 335 million tons of ore from its Pilbara operations next year, and roughly 350 million tons in 2017, it said.

The miner also said it would ramp up its cost-cutting efforts and expects to reduce maintenance costs by about $200 million a year over the next three years.

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Iron ore mining in Goa not viable

LiveMint reported that miners in Goa, where mining activities have begun after a gap of nearly three years, are set to incur losses as higher taxes and poor infrastructure have made mining operations in the state uncompetitive. According to officials at mining companies, every tonne of iron ore mined in Goa now costs a total of USD 40-45 per tonne, inclusive of taxes. This is nearly double the USD 20 per tonne cost incurred by global miners.

Mr Kishore Kumar, head of iron ore, Vedanta Ltd said “While global companies selling in China have a cost structure of about USD 18 per tonne, we are in the third quartile of the cost curve. Unless the cost structure is brought down to below USD 25 per tonne range through streamlining of logistics, selling the un auctioned stocks and a reduction of taxes, mining in Goa will not be viable for the industry.”

While Kumar did not give details about the company’s cost of production, analysts say it ranges between USD 40 and USD 45 per tonne.

A large part of this is because of the taxes imposed on ore mined in Goa, along with the high cost of logistics and transportation. According to data shared by the Goa Mineral Ore Exporters’ Association “Mining in Goa attracts a 30% export duty on 58% Fe grade iron ore (the grade refers to the quality of iron ore; anything below 60% is low grade), a 15% royalty paid to the state, a 5-15% levy in the form of a district mineral foundation tax and a 10% levy on the export price of iron ore which goes to the Goa Mineral Ore Permanent Fund Scheme.”

Mining in Goa stalled in September 2012 when the state government imposed a ban on all mining activities in response to a report by the Justice MB Shah commission, which found rampant illegal mining in the state. In October 2012, the Supreme Court upheld the ban imposed by the state. In April 2014, the Supreme Court lifted the ban on the condition that all mining leases have to be renewed and fresh approvals have to be sought from the ministry of environment and forest and the state pollution control board. However, final permissions to mine came through only in July 2015.

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Shanxi coal mines in illegal construction with capacity at 77 Mtpa

Coal mines under construction but lack of official approval in coal-rich Shanxi province have a combined capacity of 77 million tonnes per annum, according to a document released by provincial Development and Reform Commission on August 31.

A total of 14 unapproved coal mines, owned by major producers including Datong Coal Mine and Shanxi Coking Coal Group, were found in construction during a province-wide inspection, the commission said.

The move was carried out in response to twelve ministries’ call for joint crackdown on coal mines in illegal construction and production.

To regulate mines construction and ease oversupply, China’s National Development and Reform Commission and another 11 ministries jointly released a circular on July 27, asking local authorities to punish those mines under construction or expansion without official approval, or in production beyond approved capacity or with serious safety issues.

Of these mines unapproved, three belonged to Datong Coal Mine Group with combined capacity at 20 million tonnes per annum, and four owned by Shanxi Coking Coal Group, with annual capacity of 22 million tonnes.

Four illegal coal mines under Jincheng Coal Group, with combined capacity at 19 million tonnes per annum, and three under Yangquan Coal Group, with annual capacity at 16 million tonnes.

This time, Palmer’s firm Mineralogy is taking Citic to court over what it claims to be a lack of royalty payments from the project, which was built on Palmer's leases, Sydney Morning Heraldreports.

Palmer, who was Mineralogy chairman when the first deal with Citic was made, says the Chinese company — which he believes it to have a cash balance of $160 billion — had the financial means to pay its balance. He claims Citic is abusing the Australian legal system to delay its debts.

According to Palmer's estimates, the foreign company has shipped up to $500 million worth of iron ore concentrate without meeting its contractual obligations.

In the past, the two firms have fought over several issues, including access to the port used by their iron ore Sino project, claims of corruption, misuse of funds, defamation, and racism.

The companies first locked horns in 2012 and have continued battling over the past two years, after Citic launched legal proceedings, which accused Palmer of misusing close to $9 million (A$12 million) through his company Mineralogy to finance his election campaign last year.

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Shandong to rein in growth in coal consumption

Shandong province, a major coal consumer in eastern China, aimed to rein in the growth in coal consumption by the end of this year, cutting the total coal use below the level in 2012, according to a document released by the provincial Development and Reform Commission on August 28.

The province planned to cut 10 million tonnes of coal consumption from the 2012 level next year, and achieve the 20-million-tonne consumption reduction set by the central government by 2017.

Specific coal reduction targets will be allocated to 17 cities of the province, which will be carried out by major coal-consuming firms, according to the document.

To help realize the target, Shandong will continue to phase out outdated capacities, upgrade existing coal-fired builders and implement energy-saving projects, the document said.

Clean and efficient use of coal in coal chemical, coke making and industrial boilers will be put forward steadily, and more efforts will be made to develop new and renewable energy sources and to get more electricity and natural gas from other provinces, it said.

As a major energy consumer, Shandong’s energy consumption accounts for nearly 10% of the national total. In 2012, coal took more than 75% of the province’s primary energy consumption, and 12% of the nation’s total coal consumption.

The province was ordered to cap its total energy consumption at 344 million tonnes of standard coal by 2015, with annual growth in energy consumption no more than 2.2%, according to document previously released by the National Development and Reform Commission.

China's crude steel output at 476 mln tons down 1,8% in Jan-Jul

China, the world's largest steel producer, saw its crude steel output decrease 1.8% year on year to 476.04 million tons in the first seven months of this year, according to the latest statistics released by the China Iron and Steel Association.

The commission says that the country's output of steel products up 1.5% year on year to 650.91 million tons in the reporting period. However, its output of iron alloy declined 2.5% to 20.74 million tons.

China exported 62.13 million tons of steel products in the first seven months, up 26.6% year on year, while its import of steel products reached 7.7 million tons, down 9.1% from a year earlier.

China's steel prices continue to decrease in Jul 2015, with the domestic composite steel price index decreasing 4.68 points to 63.45 compared with that in Jun this year. The prices of 20 mm steel sheets and 1-mm cold-rolled coils were at RMB 2,146 per ton and RMB 2,861 per ton, down 37% and 30.5% year on year.

China's third and fourth largest coal miners report substantial losses

Shannxi Coal Industry Co. Ltd., the third-largest listed coal miner by volume in China, saw its net loss reach 955 million yuan over January-June, compared with a net profit of 825.8 million from the same period last year, showed data from the half-year report of the company.

During the same period, total revenue of the company stood at 18.98 billion yuan or 44.83% of the annual plan, falling 10.11% from a year ago.

The average price of the company’s commercial coal fell 12.51% on year to 267.73 yuan/t over January-June, with the price of self-produced coals falling 25.73% to 181.27 yuan/t.

Coal output from Shaanxi Coal stood at 53.02 million tonnes or 50% of the annual plan during the same period, a drop of 7.92% on year.

It sold 66.58 million tonnes of commercial coal in the first half of the year, edging up 1.4% year on year, it said.

The company predicted a sharper drop in profit in the second half of the year, given the persisting sluggish coal market.

Yanzhou Coal Mining, the listed unit of China's fourth largest coal miner Yankuang Group, plunged into the red in the first half of the year, as cost reduction was insufficient to counter the impact of a sharp drop in coal prices and sales volume.

Net loss amounted to 50.63 million yuan ($7.91 million) in the half, compared with a profit of 587.24 million yuan in the year-earlier period.

First-half revenue plummeted 41.4% year on year to 18.14 billion yuan, on the back of a 27.6% decline in coal sales to 43 million tonnes, and a 24.1% tumble in average selling price to 505 yuan/t.

Output of processed saleable coal produced by its own mine fell 5% year on year to 32 million tonnes in the first half.

First-half operating profit from coal mining dropped 14% year on year to 406.41 million yuan, which came despite the firm slashing its production cost per tonne by about 15% year on year at its domestic mines, and by 24-28% at its overseas mines.

Yanzhou said it has cut costs mainly by downsizing staff, "optimization of human resource", streamlining of production systems and processes, and by cutting materials consumption.

In the year's second half, it said, it would continue to cut costs by "centralized purchasing, competitive negotiation and online procurement for materials and equipment" to control costs.

NRW Holding reports losses at Roy Hill iron ore project

The West Australian reported that NRW Holdings’ crippling contract dispute at the Roy Hill iron ore project has seen it burn through $120 million cash in the past year and revamp debt facilities. After turning in a $230 million annual loss, the civil and mining contractor conceded it would make an unspecified loss on the $620 million rail works project.

Project manager Samsung C&T withholding payments for the past four months because of the dispute has put NRW under considerable financial pressure. Samsung has contested adjudications in NRW’s favor of about $26 million, with further claims pending. The WA contractor laid off more than 2200 employees, over 70 per cent of its headcount, during the financial year.

NRW said “The Roy Hill rail contract loss recognizes that it is unlikely that an outcome can be negotiated which supports a position where the company can at least recover costs incurred on the contract.”

MD Mr Jules Pemberton said NRW was seeking a fair commercial outcome through talks with Samsung, Supreme Court action and the dispute resolution process. He said “The business has managed through the cash flow impact of Samsung’s decisions to restrict payments to NRW on the Roy Hill rail contract since April, has continued to make all debt repayments when due and is in compliance with banking covenants.”

While the net loss included non-cash impairments of $157 million, NRW’s cash losses are significant. It held $35 million at June 30, compared with $155 million a year earlier.

Arcelor Mittal South Africa to close mills, review largest plant

ArcelorMittal South Africa is planning to shut two mills and is reviewing operations at its largest plant, it said on Monday, as the money-losing unit of the world's biggest steelmaker struggles with weak demand and lower prices.

South Africa last week raised the import tariff on steel to 10 percent, the maximum level allowed by the World Trade Organisation, to be in line with its steel making peers .

ArcelorMittal said in a statement that trading conditions have continued to worsen since it started reviewing its long steel business in July, adding that the higher import duty will only bring relief over the medium to long term.

ArcelorMittal said it had started discussions with unions about the closure of two mills, cutting as many as 400 jobs, at its plant in Vereeniging, about 60 km south of Johannesburg.

Operations at the company's largest plant, in the nearby town of Vanderbijlpark, continues to be unprofitable and will be reviewed before the end of October, the firm said.

"The company will first consider implementing alternatives before retrenchments are implemented, as a last resort," it said.

ArcelorMittal has also launched applications with South Africa's state-run international trade commission to impose anti-dumping duties on cheap Chinese steel.

China coal giants run over 100pct CTO capacity in H1

China’s coal giants Shenhua Group and China Coal Energy Co., Ltd. operated their coal-to-olefin projects at over 100% capacity in the first half of the year, despite falling oil prices, showed the half-year reports released late August.

Capacity utilization of Shenhua’s 60,000-million-tonne coal-to-olefin project at Baotou, Inner Mongolia reached 107% on average over January-June, the company said in its half-year report on August 22.

The group produced 161,200 tonnes of polyethylene (PE) and 160,000 tonnes of polypropylene (PP) during the same period, up 10.6% and 7.5% year on year, respectively.

However, operating revenue and profit of the project amounted to 2.97 billion yuan ($463.9 million) and 561 million yuan, down 13.4% and 42.6% on year, mainly due to an over 1,000 yuan drop in PE and PP sales prices.

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